May 13, 2004
Out of Context
About a year before Gov. Arnold Schwarzenegger signed a major reform of California's disastrous workers' comp system, the same basic reforms were fought and eventually killed by elected Democrats trying to protect lawyers who gamed our broken system but gave heavily to Democratic campaign coffers.
You never read that story, I will bet, because most California media have tacitly agreed on a shallow storyline that does not include detailing how the forces against reform have proved so effective.
The media have failed in a core duty: to explain the roots of bad public policy, thus promoting intelligent civic discourse and enabling the corrective tendencies of democracy. Now, most media continue to engage in context-free coverage of a 75-page thicket of compromises that may or may not bring billions of dollars in savings.
Before, few journalists did the legwork to regularly compare foolish California practices to several forward-thinking states, where costs are far lower and the truly injured get better coverage. With reform, the media laziness continues. For example, news reports offer so little context you wouldn't know that some reforms are unlikely to survive legal challenges mounted by workers' comp attorneys who enjoy sympathetic California courts that have regularly watered down reform.
Such details distract from the storyline: The governor won; we'll save billions.
Lack of context can be seen in how the media went gaga over the new "health network" rule. The rule requires an allegedly injured worker to use a doctor from a network selected by the company. California workers currently engage in the worst "doctor shopping" in the nation, often seeking physicians who over-treat injuries and let them stay off the job for months. Had excitable journalists picked up a phone, they might have learned that studies of states using such networks show fairly modest savings.
California may indeed save billions from the entire reform package, but only if Schwarzenegger puts his formidable chess skills to work by thinking three steps ahead of the anti-reformers already preparing to file lawsuits against reform, and only if the governor cleans up huge new loopholes and complexities that threaten serious savings.
The media has largely ignored the fact that smaller businesses -- the economic engine in the Golden State -- under reform must become experts wise to loopholes. Unless Schwarzenegger corrects this bias, smaller firms could suffer tremendously.
With California losing companies to Texas and other inexpensive states, that's news.
Take the new $10,000 medical care "limit" for workers, who under reform are now free to immediately seek care before their claim is approved by the employer.
"Whenever you put a dollar limit, it's a message that this is how much the bill can be run up to," says North Carolina's James Moore, a nationwide workers' comp consultant. "That's why most states limit it to $2,000 or $2,500."
But California's Legislature, in a compromise with union and Democrats' demands, chose $10,000. Says Moore: "You can even get a surgery before you get a ruling on whether you qualify."
For years, too many California workers gamed the system. Unions, which saw phony paid disabilities as akin to free vacation, vociferously fought to protect such perks.
Now, workers can burn through $10,000. Trial lawyers are drooling. A lucrative new courtroom front opens for them once companies get a peek at huge medical bills and refuse to pay.
"This $10,000 provision needs to be re-legislated, it's that bad," Moore says. "The smaller companies are going to be lost. They won't know what hit them."
To get blindsided by these new complexities, a company needn't be tiny -- just too small to employ a fancy risk management division that tracks all this confusion.
Howard Barmazel is president of Northridge Mills, a garment factory in San Fernando. He's respected in the Jewish community from which he hails, as well as in the Latino community from which he draws many workers, because he offers good compensation and makes it his mission to promote home ownership among his workers.
His philosophy produces high-quality products from a highly motivated workforce. Barmazel survived when other garment manufacturers proved unable to compete against foreign competitors.
Yet despite having few injuries, Barmazel more than $25,000 per week in premiums for his 400 workers. This year he slashed overtime because the fewer hours his workers put in, the cheaper the premiums. He prays for major workers' comp reform. He doesn't want to close. It's a perverse and maddening situation. Barmazel could easily keep his crews working overtime to meet orders, and the crews would love the work.
"My insurance agent is a really savvy guy and we can't figure out the reforms -- and boy we've tried," Barmazel says. "I still think Schwarzenegger is a knight on a white horse, but he's going to have to fight every angle to make this work. All businesses in California are struggling with this thing, and I have no idea what the future holds. That's just really bad for me and my employees."
And Barmazel is a pro-active employer with brains. Thousands aren't.
Schwarzenegger needs to fix the loopholes and vagueness that could turn reform into a courtroom bonanza. Much can be repaired via tight regulations that simplify unnecessary complexities and precisely spell out rules.
The governor just fired the bureaucrat who wrote ineffective regulations under Gray Davis and Pete Wilson. Little surprise when few California media failed to report the firing. The story was too subtle for many media, even though it spoke volumes. By replacing a deadwood bureaucrat with a leading attorney in civil and governmental law, Schwarzenegger is acknowledging he ended up with a compromise he must fight to clean up via regulation.
If the governor can do that, California may yet see the billions of dollars in savings that many journalists, addicted to shallow reporting, imply is a sure thing.
Jill Stewart is a syndicated political columnist and can be reached at www.jillstewart.net.