Synopsis: Winner, Winner!!—How Do We Help Illinois’ New Leader?
Editor’s comment: After more than a decade of watching Illinois descend into a financial morass, we are happy to report Bruce Rauner is the Governor-Elect of Illinois! We do feel you as our readers and KCB&A as a defense firm played a role in helping him get the nod and we want to continue to assist him whenever and wherever we can. Mr. Rauner is the first Governor in IL state history to volunteer to do the job without compensation—this symbolizes the fact he genuinely wants to cut government costs and lower your tax bills. To our further understanding he and his top aides are among our readership. We have a couple of important thoughts for him to consider and we are asking for your best thoughts, as he plans and prepares for his tenure as Illinois Governor.
First and foremost, pension reform should be front-and-center. In this regard, we recommend he make a pretty important phone call to IL Supreme Court Chief Justice Rita Garman and ask her to put their crucial pension reform ruling on the front burner. The Supreme Court is considering the viability of pension reforms proposed by outbound Governor Quinn and while they are doing their important work, Illinois taxpayers are watching the $105B+ pension deficit skyrocket. In the event the Supreme Court tosses out all proposed pension reforms, we hope Plan B can start moving into place. Whatever they do, we consider the Illinois-gov’t-seven-fake-pension-programs crisis to be the biggest challenge our new Governor will face. Please give us any solid thoughts about how he should best attack it.
Please remember the reforms under Supreme Court consideration affected only three of the five IL pension programs. The unbelievably lucrative and massively unfunded judicial and legislative pension programs were not “reformed” at all. We strongly agree with the Chicago Tribune about completely ending the legislative pension program altogether. http://www.chicagotribune.com/news/opinion/editorials/ct-pension-illinois-general-assembly-edit-jm-20140908-story.html Legislators do not work full-time and they aren’t supposed to be getting hundreds of millions from taxpayers after they “retire,” as they currently are. We suggest pay out the current retirees (because you have to under the law) but end the “winning lottery tickets” for new and future legislators. We also hope someone takes a look at judicial pensions and reforms a program that can pay former judges over a million dollars a year for each year of service if they live long enough.
So What About Workers’ Compensation in Illinois under Governor Rauner?
Workers’ compensation hits Illinois state government and all taxpayers in three separate ways.
ü First, you have the cost of the IWCC or workers’ comp administrative/hearing costs.
ü Second, you have the State of Illinois as a large employer with its own workers’ comp claims.
ü Third, you have the IWCC, its decision-making and its impact on other smaller governments and private businesses in setting costs with awards and settlements for work-related accidents and diseases.
1. IL WC Administrative Costs
In dealing with the first of the three concepts, we recommend Governor Rauner and Lieutenant Gov. Sanguinetti memorize five letters “ATBBC” or Across-the-Board-Budget-Cuts. We recommend our new leaders consider 10% Across-The-Board-Budget-Cuts for all state agencies, including the Illinois Workers’ Compensation Commission. Why 10% cuts?—well, it is a great start on a new and never-before-seen concept in Illinois state government. We feel it might work in a bipartisan setting, if the Democrat state legislative majority will sign on. We find it hard to believe Multimillionaire House Speaker Mike Madigan and Senate President Cullerton would fight reasonable budget cuts when our state is always billions behind in paying “our bills.” If ATBBC could be put into place for all state agencies, we might not need the Madigan-Hates-Millionaires Tax and we might not need to bring IL income taxes up to almost 9% as Senate President Cullerton said he wants/needs to pay “our bills.”
We want IWCC Chairman Michael Latz and the other Commissioners and the various boards to take a hard look at agency expenditures. The defense team at KCB&A is happy to participate in the cost-cutting process or any open hearings about it. We note the 2013 Annual Report for the IWCC is on the web at http://www.iwcc.il.gov/annualreport13.pdf. The report indicates they spent $23,546,547 during fiscal year 2013. We are sure they can get by on 10% less or about $21M. We also strongly suggest the Rate Adjustment Fund, the Second Injury Fund and the “Settlement Fund” all come to a close after hearings and discussion. That is a complex discussion that we won’t outline here but there are millions of wasted business tax dollars in all three funds.
2. IL WC Government’s Own WC Claims Program
Aside from the Commission’s administrative function, our own State’s workers’ comp claim management has plenty of room for improvement. A couple of years ago, there were over 25,000 pending state WC claims with about six people to adjust them. Their computer program was about twenty years old and was a great way to hide incompetence because you couldn’t get anything of value out of the mainframe.
We are sure the state gov’t WC claims program was such a complete mess the departing Governor’s administration brought in a California-based company, TriStar to try to pull the program apart and put it back together. To highlight how poorly thought out that process was, State administrators “replaced” the adjusters with TriStar but didn’t get rid of the folks TriStar replaced! As you read this, we are sure the outside legal defense teams have not been independently bid or vetted for the best service in many years. We would suggest proper staffing internally, as well as proposals be accepted for the best legal defense teams to tackle the disputed litigated claims.
In short, we salute great local administrators like Mayor Mike Houston of the City of Springfield and lots of other local governments who open their books and bring in consultants and fight to save WC costs for our taxpayers. Please take a look at this link: http://www.sj-r.com/article/20130224/News/302249938. We have never seen anything like that happen in the Illinois state government’s workers’ comp claims program and we hope to start seeing it under our new Gov. Bruce Rauner.
3. IWCC Impact on WC costs for Local Governments and Private Industry
As we advised our readers over the last year, the silly “WC advisory rates” have nothing to do with progress in cutting WC costs for Illinois business. The proper metric to review workers’ compensation costs is the State of Oregon Every-Other-Year WC Premium analysis. We feel that report is accurate and scientifically accurate. The current IL WC news is great and getting better. The biennial report by the Oregon Department of Consumer and Business Services indicated Illinois recorded the sharpest reductions in workers’ compensation insurance premiums in the entire nation over the last two years.
The Oregon study, online at http://www.oregon.gov/DCBS/docs/news_releases/2014/workers-comp-rate-study-14.pdf ranks all 50 states and the District of Columbia by the amount insurance premiums rose or dropped in the last two years. It highlights that Illinois had the steepest reduction in workers’ compensation rates when compared to the median, with an estimated rate drop of 24 percentage points between 2012 and 2014 compared to the national median reduction of only 2 percent. The report shows Illinois employers workers’ compensation premiums dropped from $2.83 per $100 of payroll in 2012 to $2.35 in 2014. We are certain this means hundreds of millions of dollars in savings for Illinois businesses.
Please also note the current Oregon study measures changes through the beginning of 2014. We are sure the strong cost-saving impact of the 2011 Amendments to the IL WC Act didn’t start until we had new claims beginning on September 1, 2011. We feel we are safe to advise our readers the trend in IL WC is costs are dropping and will continue to drop, as the years roll on. We are sure all Illinois Arbitrators and Commissioners got Senate President Cullerton’s message to give every WC claim a “haircut.” The “haircutting” remains ongoing with professional and experienced Arbitrators who are carefully considering all evidence and trying to reach a reasonable middle-ground wherever possible. We are also sure our administrators are strongly concerned about ethics and stopping WC fraud when/if they see it.
We remain concerned the IL Appellate Court, WC Division didn’t get the “haircut” message and still remains very pro-Plaintiff. With respect, we feel the “manifest weight” of the evidence isn’t very heavy when they want to reverse denials and award benefits. We feel appeals of more recent Commission decisions which were well-reasoned and adjudicated to reach the proper conclusion have been reversed by our Supreme and Appellate Courts based on interpretation of our statute. We would prefer to see the Commission have latitude to interpret facts/apply the law on a case-by-case basis without sweeping legal mandates by the reviewing Courts.
The Illinois Suggestion Box is Open, Folks!
We are sure new Governor Rauner and his transition team are readers of this KCB&A Update. We hope everyone understands the exciting opportunity present for everyone to start to change IL government for the better. We are asking you and all your friends to send us your best thoughts on how to cut costs in IL government without dramatically affecting needed services. We are hoping to work with incoming IL State Chamber President Todd Maisch and his team to come up with solid ideas for the new administration to bring down expenses and perhaps avoid the need for spiraling new taxes, tolls and fees. As we have advised, here are some common sense examples:
· Get rid or combine the offices of the IL State Treasurer or Comptroller—everyone agrees the two offices are redundant and duplicative. The projected annual savings is about $15M. Taxpayers save even more money when the administrators don’t get their “de-funded pensions.”
· Get rid of satellite offices—the IWCC has four satellite offices at hearing sites in Collinsville, Springfield, Peoria and Rockford. We do feel the hearing sites should be kept but it is our view the clerical staff there don’t perform enough tasks of importance so as to justify the cost. Actually, the IWCC only staffs three of the four offices, highlighting how unnecessary the expense for the other three offices is. The “offices” or more accurately, the nice ladies who work there don’t do much other than to answer the phone and print/hand out WC forms that are readily available online. Please note the IL Treasurer’s office recently shuttered six such satellite offices at a solid savings—do IL taxpayers need to spend several hundred thousand for printing WC forms?
· Stop buying tow trucks that don’t tow trucks. Illinois has these expensive lime-green Minutemen trucks that sort of patrol our expressways. The drivers aren’t allowed to tow your car—why buy tow trucks? Why can’t our State Police provide these very limited services to motorists?
Remember we created these simple cost-saving concepts on the outside of government, looking in. We know we have readers on the inside and all around IL government. Now is the time for you to be heard—the money you save may be your own!! If you have state government cost-cutting thoughts or ideas, send them along, please. We appreciate your thoughts and comments. Please post them on our award-winning blog.
Synopsis: Major Changes in Opioid Prescribing Hits Your WC Claims.
Editor’s comment: We feel claims handlers, risk managers and other industry participants need to be aware of the new rules that hit our entire country last month. Our federal government has stepped in to try and prevent addicts from getting easy access to otherwise legal narcotics. The U.S. Drug Enforcement Agency (DEA) announced combination drugs containing hydrocodone are now classified as Schedule II products, imposing on them the same restrictions that apply to pure hydrocodone, as well as oxycodone and morphine. The new rule will also make it more challenging for patients to gain access to Vicodin, which is a blend of hydrocodone and acetaminophen.
Your WC Claimants will now have to show up at pharmacies with handwritten prescriptions--no more call-ins from physicians or their staff. And continued use of these drugs will not be granted as many automatic refills.
Vicodin and similar products used to be grouped in the less restrictive Schedule III, but recent DEA research showed the drugs can be as addictive as pure opioids and "may lead to severe psychological or physical dependence.” The also indicate "Adding nonnarcotic substances like acetaminophen to hydrocodone does not diminish its abuse potential."
The DEA published a final rule moving hydrocodone combination products (HCPs) from Schedule III to Schedule II, starting about a month ago on October 6, 2014. The controversial scheduling change was recommended by the Assistant Secretary for Health of the U.S. Department of Health & Human Services (HHS) and supported by DEA’s own evaluation of relevant data. Under the final rule, Schedule II requirements will apply to “all pharmaceuticals containing hydrocodone currently on the market in the United States.” These requirements include, but are not limited to, requirements related to security protocols, labeling and packaging, inventory, and recordkeeping and reporting.
Only prescriptions issued before October 6, 2014, and authorized for refills may be dispensed, as long as such dispensing occurs before April 8, 2015. The DEA did state a practitioner may issue multiple Schedule II prescriptions to provide up to a 90-day supply of medication. The DEA cautioned, however, practitioners must make their own decisions “based on sound medical judgment and in accordance with established medical standards” about whether multiple prescriptions are appropriate for a patient.
For Illinois WC claims handlers and risk managers, the KCB&A defense team recommends using utilization review or UR to certify or non-certify the continued use of these drugs for your claimants. Following the 2011 Amendments to the IL WC Act, UR has a presumptive effect. We feel any claims handler who knows a claimant is using such drugs should start using UR within 45 days of the initial prescription. We recommend Genex and CID Management for UR on your pending and future claims. If you need a contact, send a reply.
Please also note the National Safety Council (NSC) released the 2014 edition of its resource named Injury Facts, which details the latest injury and fatality statistics and safety trends across the United States and worldwide. Among the more surprising statistics, the NSC found that poisonings, including those from unintentional prescription painkiller overdoses, were the leading cause of death in 18 states and Washington, DC. The increase in fatalities corresponds with the national increase in deaths from drug poisonings, including those involving prescription painkillers, says an NSC press release. According to the Centers for Disease Control (CDC), 100 people die each day in the U.S. from drug overdoses—the rate has more than tripled since 1990. The CDC points to “a growing, deadly epidemic of prescription painkiller abuse,” with three out of four prescription drug overdoses caused by opioid pain relievers.
We appreciate your thoughts and comments. Please post them on our award-winning blog.
Synopsis: Don’t Overpay--Efficient KCB&A Defense Counsel is What You Need! Federal Court awards $108,350.87 in fees to Plaintiff’s counsel on a $2,000.00 jury verdict for Plaintiff. Analysis by Bradley J. Smith, J.D.
Editor's Comment: In a ruling that we believe is important as it relates to care and feeding of defense counsel to represent you in cases where attorneys' fees go to the victor such as Section 1983 claims, Federal Employment Law Claims, Illinois Nursing Home Care Act Claims, etc., the federal Seventh Circuit stated defense counsel should not engage in "scorched earth defense strateg[ies]." In Montanez v. Simon, the Seventh Circuit Court of Appeals affirmed the federal District Judge's award of $108,350.87 on jury verdicts of $1,000.00 for compensatory damages and $1,000.00 for punitive damages. The Appellate Court reasoned the District Judge's use of the "Lodestar" method was proper in reducing the fees from $217,110.50.
Please note the high attorney fee award was predicated on the wildly high attorney defense work created by the team selected by the City of Chicago. We wish the federal courts would publish the fee amounts billed by the defense team so taxpayers could see how badly this litigation was managed on both sides. We would guess the defense costs were probably over $200K and the “overwork” caused the embarrassing six-figure attorney fee award for Plaintiff. The federal appeals court wrote:
The award will be paid by the City of Chicago, and although it’s much less than requested, it’s still a huge sum—almost $110,000—in part because the City adopted a scorched-earth defense strategy. This simple civil-rights claim, overlitigated by both sides, took on all the protracted complexity of high-stakes commercial litigation, replete with hard fought discovery battles and even a mock trial.
Plaintiff was arrested for consumption of alcohol on a public way. He was arrested by two reporting officers Fico and Simon. While in the squad car, Officer Fico allegedly punched Plaintiff in the face. Consequently, Plaintiff filed a claim under 42 U.S.C. §1983 lawsuit for excessive force against Fico and for failure to intervene against Simon. After a trial, a jury entered a verdict on the claim against Fico and found against Plaintiff on the claims directed at Simon. Thereafter, under 42 U.S.C. §1988, Plaintiff's attorneys brought a post judgment fee petition seeking fees of a whopping $426,380.00. Ultimately, the District Judge reduced the fees down to $108,350.87.
The District Judge used the "Lodestar" method to determine the proper fees by multiplying the number of hours reasonably expended by a rational hourly rate. In doing so, the District Court struck entries that were unnecessary, duplicative, excessive, or improperly documented. Specifically, the District Court reduced the hours from 1,021 to 869. Also, the Court reduced the hourly rate from $400-450 per hour for mid-level partners, to $385.00 and $175.00 for second and third year associates. Particularly, the District Court looked at reasonable rates throughout the Chicago marketplace for similar types of cases. The "Lodestar" fee ended up being $217,110.50, which is felt to be presumptively reasonable. However, under Hensley v. Eckerhart, other factors were reviewed to rebut "Lodestar." The degree of success achieved by the prevailing party is reviewed. Alternatively, when the Court cannot distinguish between work on successful and unsuccessful claims, an "across the board" reduction is sanctioned. In applying the above standards, the District Court found Plaintiff lost four of six claims and was awarded only $2,000.00 by the jury. Accordingly, the District Court reasoned there should be a fifty percent reduction of the "Lodestar" fees. On appeal, the Seventh Circuit agreed with the District Court's reasoning and affirmed the decisions on fees.
KCB&A's efficient and well-versed defense attorneys get strait to the point with their defense litigation strategy. Although they are always adaptable and further ready for the twists and turns of litigation, they always develop an early strategy to get to the logical conclusion of the case. Additionally, KCBA attorneys review the potential exposure for their clients (including the availability of attorneys' fees to the prevailing party) in their initial case assessments. In addition to Civil Rights Claims, KCBA attorneys' also handle Illinois Nursing Home Car Act cases wherein attorneys' fees are available to a prevailing plaintiff.
The research and writing of this article was performed by Bradley J. Smith, J.D. Bradley can be reached with any questions regarding Civil Rights defense, Nursing Home and ALF defense, and any other general liability defense questions at firstname.lastname@example.org.