Permanent Disability PPD BenefitsAlternative Approaches

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Permanent Disability (PPD) BenefitsAlternative
Approaches

• Peter S. Barth
• February 10, 2004

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My Purpose

• Introduce PPDcommon footing
• Where it fits in workers compensation
• Describe alternative methods currently used

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The Importance of PPD

• Nationally, 63 of costs in indemnity cases
  (NASI, 2003)
• In California, 54 of claims with over 7 days of
  disability result in PPD
• High transactions costs

4
Medical/Legal Expenses, 12 States
where med/legal used
Avg exp. where used
where med/legal used
Avg exp. where used
State
State
CA 22 1,268 NC 2 539 CT 11 825 PA 14 1,268 FL 8
528 TN 2 579 GA 4 598 TX 11 646 IL 15 699 WI 12 1,
083 IN 3 581 Median 11 632 MA 14 618 - - -
Source Telles et. al., 2003, WCRI
1997/2000 Claims with More Than 7 Days of
Disability
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Workers Compensation Is a SystemDont Consider
PPD in a Vacuum

• Permanent partial disability linkages with TTD
• Permanent partial disability linked to return to
  work
• Permanent partial disability linked to health
  care costs

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PPD in CaliforniaThe Perfect Storm

• Paid claims that extend beyond 7 days
• Long duration of TD claims in California
• Duration of TD correlated with PPD incidence
• California permanent partial disability claims
  are costly relative to other states (Telles, 2003
  WCRI)
• Return-to-work performance is poor
• 10 never return to work predominantly due to
  injury (Victor, Barth 2003 WCRI)

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California Has High Rate of Paid Claims that Run
Longer than 7 Days
Percent of all paid claims that have more than 7
days lost time
Ratio of all paid claims to those with more than
7 days lost time
State
CA 26.2 2.8 CT 24.2 3.1 FL 19.7 4.1 GA 15.3 5
.5 TX 26.4 2.8 WI 20.2 4.0
Paid claims are those where medical or indemnity
benefits have been paid. For claims with more
than 7 days of disability or where a PPD, a
permanent total or a death benefit was
paid. Source Barth, Helvacian, Liu, 2002, WCRI.
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TD Duration Rates () for Claims with More than 7
Days of Lost Time
Duration of Temp Disability
WI
FL
GA
TX
CA
CT
8ltDaysgt13 20 21 11 13 12 21 14ltDaysgt27
16 21 24 21 17 25 28ltDaysgt89 25 32 31 30 27 33 9
0ltDaysgt119 5 6 6 6 7 6 120ltDaysgt179
7 6 7 7 10 5 180ltDaysgt359 12 8 10 9 14 6 360ltDay
sgt719 11 4 7 7 9 2 Daysgt 720 4 2 3 7 4 1 Total 10
0 100 100 100 100 100
For claims with 7 days or more of disability or
where a PPD, a permanent total or a death benefit
was paid. 1996 claims with experience through
June 1999. Source Barth, Helvacian, Liu, 2002,
WCRI.
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PPD Rates () and Duration of TD
Duration of Temp Disability
FL
GA
TX
WI
CA
CT
8-13 days 13 12 10 6 9 5 14-27 days 19 19 16 14 19
10 28-89 days 36 43 30 27 38 28 90-119
days 60 60 53 47 59 48 120-179 days 72 72 65 60 69
59 180-359 days 86 77 78 74 78 74 360-719
days 93 84 79 77 83 83 Daysgt 720 82 68 73 48 87 75
All Cases 54 43 45 43 54 29
For claims with 7 days or more of disability or
where a PPD, a permanent total or a death benefit
was paid. 1996 CLAIMS WITH EXPERIENCE THROUGH
1999. Source Barth, Helvacian, Liu, 2002, WCRI.
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There Is Considerable Commonality in State
Approaches Apart from PPD

• Linked to AWW
• Wage replacement rates
• Maxima and minima
• Survivor benefits

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Commonality in PPD Is in the Goals

• Adequate benefits/horizontal equity
• Prompt, efficient delivery
• Return to work
• Costs in line

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When Do PPD Benefits Begin?

• Return to work
• MMI
• Expiration of TD benefits

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Approaches to Delivering PPD Benefits

• Unscheduled benefits
• Impairment
• Wage loss
• Loss of wage earning capacity
• Two tiered (bifurcated)
• Scheduled benefits

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19 States Use Impairment Approach

• Solely medically determined (15)
• Impairmentage modified (2)
• Impairmentadjusted (hybrid) (2)

Source Barth and Niss, 1999, WCRI.
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10 States Use Wage-loss Approach

• Actual and ongoing earnings losses
• 7 States have a maximum duration
• States may or may not use MMI

Source Barth and Niss, 1999, WCRI.
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13 States Use Loss of Wage Earning Capacity

• Anticipated earnings losses
• e.g., the diminished abilityto compete in an
  open labor market
• Other factors include age, education, occupation
• Difficult to administer

Source Barth and Niss, 1999, WCRI.
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9 States Use Two-Tiered (Bifurcated)Approach

• Impairment or loss of wage earning capacity
• Impairment sets lower bound for loss of wage
  earning capacity

Source Barth and Niss, 1999, WCRI.
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43 States Have Scheduled Benefits

• Schedules substitute or complement above
  approaches
• Rarely schedule the spine
• For total loss impairment approach
• For partial loss impairment and/or loss of wage
  earning capacity

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