Ask the Scholar

Document scope · 1 page
doc
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory. For page-specific OCR and visual context, open one of the page chats.

Scholar Source Context

Document identity
localId
353710382
label
"Strategies for Managing Disability Costs" [1987]
core
doc
dtoType
document
pageCount
1
Source metadata
Source extras
naId
353710382
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
da6a1ddad5a9854f
ocrText
Originally Processed With FOIA(s): FOIA Number: S S FOIA MARKER This is not a textual record. This is used as an administrative marker by the George Bush Presidential Library Staff. Record Group/Collection: Donated Historical Materials Collection/Office of Origin: Frieden, Lex, Collection Series: Printed Materials Subseries: Papers/Books OA/ID Number: 52128 Folder ID Number: 52128-005 Folder Title: "Strategies for Managing Disability Costs" [1987] Stack: Row: Section: Shelf: Position: STRATEGIES FOR MANAGING DISABILITY COSTS Michael E. Carbine Gail E. Schwartz Washington Business Group on Health/ Institute for Rehabilitation & Disability Management Strategies For Managing Disability Costs Michael E. Carbine and Gail E. Schwartz November, 1987 A Publication of the Washington Business Group on Health/ Institute for Rehabilitation and Disability Management Produced in part through a grant from the J.M. Foundation Acknowledgements This disability management workbook represents findings from the "National Disability Management Conference," held May 11-12, 1987 in Washington, D.C. The conference was sponsored jointly by the Institute for Rehabilitation and Disability Management (a partnership between the Washington Business Group on Health and the National Rehabilitation Hospital) and Thomas L. Jacobs & Associates. Special thanks go to these organizations for their help in planning and organizing the conference. In particular, we wish to thank Ellen Menton, Sheri Farris, Susan Dickinson, Donald Galvin, Ph.D., and Sara Watson of the Washington Business Group on Health, and Diane Yeater and Josephine Madden of Thomas L. Jacobs & Associates. We also thank all the speakers for their thoughtful presentations, which made the conference a success. In addition, we thank the exhibitors for making the trade show possible. Finally, we are grateful to the J.M. Foundation and to the National Institute for Disability and Rehabilitation Research for providing the financial support for this publication. For more information about the Washington Business Group on Health, or to order additional copies of this publication, please contact WBGH, 2291/2 Pennsylvania Ave. S.E., Washington, D.C. 20003, telephone (202) 547-6644. ii Executive Summary Disability costs are staggering. The private and public sectors are paying billions of dollars for disability benefits, losses in productivity, absenteeism, retraining, replace- ment, and disability related health expenses. Disability expenditures are becoming increasingly costly for employers because a growing proportion of people are becoming disabled during their most productive years (ages 17-44). Employers are faced with the challenge of developing innovative ways to retain employees who become disabled. At the Washington Business Group on Health's National Disability Management Conference, co-sponsored by Thomas J. Jacobs and Associates, over 200 representatives from major employers, providers and government convened to discuss cost-effective strategies for managing disability. Several companies, including Steelcase, General Motors, Federal Express, Walbro, Herman Miller, Honeywell, and others have responded to the disability crisis by creating cost-effective return-to-work strategies. The companies that have developed disability management strategies view their employees as valuable resources. Most disability management programs also share other common elements, including: Well-defined and articulated resource strategies; Provisions for early intervention in all rehabilitation cases; Cooperation between employees, providers and employers; Union involvement from the program's inception; Support from top management; A system to effectively manage the disability claims function; and The belief that rehabilitation is an ongoing process that goes beyond supportive services and opportunities. The majority of companies view disability management as a multifaceted system initiation which will maintain the company's present workforce and bring people back into the workplace to productive and rewarding jobs. The goal is to reduce disability, lower costs and better utilize human resources. iii Contents I. INTRODUCTION 1 II. DISABILITY ISSUES: DEFINITIONS AND STRATEGIES 3 III. COST MANAGEMENT STRATEGIES 7 A. Human Resource Strategies 8 B. Labor-Management Partnerships 10 C. Functional Assessment and Duration Guidelines 12 D. Data Analysis 15 E. Designing a Long-Term Disability Program 17 F. Corporate Medical Departments/Independent Medical Exams 19 G. Effective Rehabilitation: Management Strategies 21 H. Fraud and Malingering 24 I. Wellness and Health Promotion Strategies 26 IV. SOCIAL SECURITY/LEGISLATIVE ISSUES 28 V. SUMMARY AND CONCLUSIONS 30 VI. APPENDICES 31 iv I. Introduction W hile the problem of disability often is asso- ciated with an aging population, statistics "Disability is an attitude issue, not just an income indicate that the disabled population is issue, not even just a health or medical issue. Many becoming increasingly younger-between the ages of could, in fact, say it is an issue of our own learning disability, our failure to learn how far others can go, 17 to 44-and predominantly male. Over the past 25 It is our disbelief about their ability, our prejudice years, there has been a 400% increase in the number about their disabilities that often stand in the way of of severely disabled people between the ages of 17 and us making progress together. 44, with a clustering toward the 24-25 age cohort. These Willis B. Goldbeck, Washington Business Group on Health figures are significant because they represent an impor- tant segment of the workforce in its most productive programs can be highly cost beneficial. They represent years. a proven way for employers to reduce their compens- Last year, between $120 and $160 billion in disability able loss exposure, return workers to productive claims benefits were paid out by business and govern- employment, and enhance the company's profitability ment. Short-term disability costs frequently run from and competitiveness. They make a strong case for the 2% to 4% of total payroll, while long-term disability argument that disability benefits need not be an auto- costs add another 1/2% to 1% of payroll to this amount. matic and unchallenged cost of doing business, and For every $1 million in payroll, $50,000 is spent on that vocational rehabilitation programs can and do work. disability claims alone. The projected cost increases in disability benefit plans range from 6% to 10% annually. Each injury is now estimated to cost an average of Disability Facts $19,000. A company with 1000 employees can expect to have 27 lost workday injuries each year. With a 4.5% Over twenty-one million Americans of working age (16 to 64) are disabled. (1) profit margin, a company must realize $11.3 million in Over eight and a half percent of the working age sales just to offset these costs. population are occupationally disabled (they are able This data offers a compelling argument for rigorous to work but not at the job they held before their employee-based disability management and rehabili- disability). (2) tation initiatives. But disability benefits, medical ben- Two-thirds of all disabled Americans between the efits and workers' compensation activities typically are ages of 16 and 64 are not working; but two-thirds of fragmented in terms of administration, financing, data those not working say they would like to work. (3) collection and analysis, plan design, and case manage- In 1982, total disability costs equalled approximately $121.5 billion. (4) ment. This fragmentation reduces the effectiveness of In 1982, $67.4 billion were spent on cash transfers an employer's cost containment efforts, increases (SSDI, SSI, insurance payments, workers' compen- administrative costs, and makes benefit planning, data sation, AFDC). (5) analysis and cost management more difficult. Industry currently spends $7 billion a year on sick It has only been within the last few years that employ- leave. (6) ers have launched comprehensive, systematic disabil- Short-term disability costs frequently run from 2% to ity management programs designed to maintain the 4% of total payroll, while long-term disabilty costs present workforce and bring impaired workers back add another 1/2% to 1% of payroll to this amount. (7) into the mainstream of employment. Alan C. Benden, Each injury is now estimated to cost an average of $19,000. (8) Assistant Director, Life and Disabilty Insurance, Gen- A company with 1000 employees can expect to have eral Motors Corporation, notes that one reason for the 27 lost workday injuries each year; with a 4.5% profit delay in initiating these programs is the unchallenged margin, the company must realize $11.3 million in belief that disability benefits are an unfettered cost of sales just to offset these costs. (9) doing business. Many employers have routinely writ- Chronic pain accounts for an estimated $70 billion a ten off disabled employees, paying compensation claims year in medical costs, lost working days and com- and other benefits as an unavoidable business expense. pensation payments. (10) Another reason is prejudice and stereotypical attitudes In Michigan, the rehabilitation cost of placing dis- about disabled workers and rehabilitation. abled employees with new employers was on aver- age twice that for returning them to their former Several companies are demonstrating, through var- employers. (11) ious disability management strategies, that carefully (See Appendix 3 for sources) planned and coordinated disability and rehabilitation 1 On May 11-12, 1987, the Washington Business Group tical suggestions and recommendations that emerged on Health's Institute for Rehabilitation and Disability from the conference. It also offers brief case histories Management (a partnership between the Washington and summaries of topical issues. The information is Business Group on Health and the National Rehabili- indicative of what has worked for individual companies tation Hospital) joined with Thomas L. Jacobs & Asso- in specific circumstances. Because companies vary sig- ciates, Inc., a benefits consulting company, in sponsor- nificantly, not all strategies will be appropriate when ing the first National Disability Management Confer- designing and implementing disability management ence. The topic for the conference was "Strategies for initiatives. Strategies must be selected and modified to Effective Cost Control." Through workshops and panel fit individual situations. discussions, representatives from employer-based dis- Section II discusses the general issue of disability ability management programs, insurance companies and management and rehabilitation, including the prob- rehabilitation facilities shared their experiences and lems associated with program design and implemen- offered practical advice on how to reduce and control tation. Section III offers nine strategies for designing disability costs through employee-based disability and implementing cost-effective disability manage- management and rehabilitation initiatives. ment initiatives. Section IV describes current political This workbook represents a collection of program issues. Section V concludes with a discussion of topics design and implementation strategies as well as prac- for exploration and research. 2 II. Disability Issues: Definitions and Strategies M odel employment-based disability manage- Despite these challenges, experiences from several ment and rehabilitation initiatives target the companies demonstrate that with proper planning and early identification of job-related disability careful thought, disability management programs can problems; management of physical symptoms; planned not only serve the economic and productivity goals of management of disability-related costs; the willingness employers but also enable disabled employees to attain to modify jobs; and development of personnel policies levels of functioning that permit them to return to their that facilitate work return and job retention for the old jobs or to new jobs, and to remain productive mem- injured, disabled or chronically ill worker. These ini- bers of the nation's workforce. tiatives must be a coordinated activity that becomes part of a company's total work system. As a cost-man- agement strategy, disability and rehabilitation initia- Challenges and Solutions tives reflect an awareness of the high costs of illness, Many companies lack an integrated policy concern- injury and disability, and a realization that there are ing disability management, rehabilitation, and well- cost incentives for returning occupationally disabled ness. Most employers (62% according to a 1986 survey employees to suitable employment at the earliest pos- by the Institute for Rehabilitation and Disability Man- sible time. agement) have not designated someone within their Disability management initiatives must also take into company as responsible for coordinating and managing account the multitude of "disincentives" inherent in disability benefits. Few companies employ full-time the system, factors which can, if unaddressed, deter rehabilitation counselors. Nor do many companies have companies from achieving their disability management mandatory rehabilitation provisions within their long- goals. For example, the "disability system" at times term disability policies. appears to complicate the process of rehabilitation and On the other hand, companies with successful dis- return to work. State workers' compensation programs ability management programs typically have a clear, often do not do an effective job in ensuring that workers concisely articulated disability policy. This policy serves with job-related disabilities are helped to recover lost to integrate the disability function into the company's abilities and return to their previous jobs or, when this work system and mandates strong coordination among is impossible, to learn new skills. related activities. When outside medical, social and The stresses and trauma associated with chronic ill- rehabilitation resources are used, they are brought under ness, injury and disability can hinder a person's moti- the company's management system to the extent pos- vation to participate in rehabilitation. In the face of sible. In many instances, the function is an integrated economic, physical, social and psychological threats, part of the company's medical, counseling, employee disability benefits become an attractive and secure benefits, and/or employee assistance program. alternative to continued rehabilitation and return-to- Early intervention strategies and a high level coop- work efforts. Finally, employee or employer ignorance eration between disabled employees and employers of, and skepticism towards, disability management and are the keys to successful rehabilitation and return to rehabilitation techniques often work against successful work. These intervention strategies motivate employ- rehabilitation and employment. Any or all of these rep- ees to participate actively in the rehabilitation process, resent significant challenges to the disability manage- and are successful in preventing short-term disabilities ment field. from becoming long-term disabilities. Companies with effective disability management programs tend to define disability as a medical impair- Attitudes About Returning to Work ment that affects physical functioning on the job. But disability also is seen as a condition affecting the indi- "Many of us can work and many of us would like to vidual's social, psychological and intellectual environ- work and live independently in our own communities and homes. But we need certain kinds of support and ment. In effect, it is not just an income issue. It is a assistance to do this. Recent data from the Harris Poll medical, health and productivity issue as well, and a suggests that more than half of those with disabilities state of mind. would give up their benefits in order to go back to work A comprehensive disability management program if they had the opportunity." should encompass multifaceted, systematic initiatives Lex Frieden, National Council on the Handicapped which will maintain the company's present workforce and bring people back into the workforce to productive 3 and rewarding jobs. Disability should be seen as a behavior, the sum total of the physical and psycholog- General Motors' Disability ical impairments that may exist. But as a behavior, it Claims Cost Control System can be learned and unlearned. The goal is to reduce disability, lower workers' compensation costs, and bet- In 1969, sickness and accident payments at General Motors exceeded $100 million for the first time. The ter utilize our human resources. company began meeting with its union (the United Rehabilitation also means more than bringing an Automobile Workers of America) and insurance carrier individual back to a minimum level of functioning. It (Metropolitan Life) to see how benefit costs could be is an ongoing process that should extend well beyond controlled. The meetings resulted in a comprehensive this point to providing supportive services and oppor- and integrated disability cost management system. Metropolitan Life began by initiating a disability tunities that will help people maintain and exceed their management training program at each company plant performance levels SO they can realize as much of their (General Motors administered disability benefit pro- potential as possible. grams at each location while Metropolitan administered Successful disability management programs start from the long-term disability plan from its headquarters) a well-defined human resource strategy. This strategy The two-week training program. evolved into a local study group program through which study teams encompasses the company's corporate culture and val- reviewed the benefit systems and procedures used at ues, reflects how the company views its employees, each plant. Where deficiencies were found, new claims and dictates the kinds of services offered employees. payment procedures were instituted and new control This is, in effect, the company's "people philosophy." systems put into place. Intensive team and one-on-one This philosophy typically reflects a belief that employ- training programs were also offered for claims super visors and analysts. ees represent an investment, a resource, and an appre- A UAW proposal resulted in the creation of a joint ciating asset. And it reflects a genuine concern for and impartial medical opinion program under which commitment to the employee, especially when illness, employees submitting disputed claims are examined injury or disability strikes. by physicians selected jointly by the UAW and GM. The company's attitudes toward disability also will Because this program involvés a binding opinion fea- ture, claims litigation has dropped significantly, impact on program success. Too often, a company's Each claim is managed by the plant medical clinic approach to disability focuses on the negative and on a case-by-case basis. General Motors currently is stresses limitations when it should look for and create developing regional benefit centers where GM has a opportunities that will help impaired workers better concentration of facilities to handle life insurance and manage themselves and contribute to company pro- disability claims. These regional centers offer the advantages of full-time staff; trained, stable workforces; ductivity. Alan C. Benden of General Motors puts it and administrative flexibility not generally available this way: we should think positive about disability, i.e., when local plants administer the process. A pilot national rather than saying that an employee can't lift over 25 center is also being developed to service life insurance pounds or must sit 50% of the time, why not say that and disability claims for the company's stand-alone the employee can lift up to 25 pounds or can walk 50% plants. To tighten the program's administrative features; GM of the time? This attitudinal shift makes a difference developed an experience rating system which set dis- in the kinds of goals a company sets and how well ability costs for each plant. The company also devel- programs are able to achieve those goals. oped standard data and acceptable disability duration A disability program cannot be all things to all peo- guidelines by diagnosis; instituted a regional consul- ple. Some employees suffer functional losses that do tant program which provides specialists from Metro- politan Life at each facility to help with onsite evalu- not meet criteria that would automatically bring them ation and benefit control procedures; designed training into the company's disability management system. But programs for sickness and accident benefit claims while this does not mean that they will not require superviors; and bégan developing close contacts with services or support, such services may be better pro- community physicians to obtain their support and explain vided through other programs and community-based GM's benefit plans and disability management objec: tives. The disability database was also redesigned to resources. At the same time, different kinds of disabil- provide for prompt claims payment with less input. The ities produce different needs and entail different prob- new system provides claim histories for each employee lems. Temporarily disabled employees, some of whom and allows claim analysts to spend more time on claims may require little or no rehabilitation and can perform control activities. less demanding duties until recovery is complete, may General Motors reports that to date, the company has saved $140 million in disability costs, and is continuing be relatively easy to place in modified work situations. to add $180 million annually to that figure. However, But appropriate supports must be provided so that the the company believes that its disability costs are still temporarily disabled do not become permanently dis- too high and can be lowered even further. abled. On the other hand, those with permanent impair- 4 ments who will never be able to return to their former jobs but can be rehabilitated to perform other jobs often Aetna's Cost Control Strategies are more difficult to place. Aetna Insurance uses several cost control strategies While there may be a lack of data upon which to base for managing worker's compensation claims. These program design and management decisions, several include a claims "management-by-objective" (MBO) employers have developed innovative data systems, system; the AELIRT system; and Medicall. and are using these systems to institute effective case Aetna's MBO system for claims management is a team management strategies; categorize and assess func- effort in which the company works with the employer, injured employee, family and, when appropriate, the tional impairment and capability; predict disability attending physician to set a disability management duration per type of injury; identify factors for success objective, including a date when the employee will in rehabilitation; manage disability-related claims and return to work. Within this framework, several sup- costs; create transitional and modified worksite pro- porting objectives are then set involving benefit pay- grams; and institute and evaluate comprehensive well- ment schedules, physician re-evaluations, claims pro- cessing targets, and other administrative factors. ness and health promotion programs. The MBO team includes claims representatives or Companies with successful disability management workers' compensation specialists; nurse consultants; programs typically approach disability as a human medical cost control coordinators; and home office med- resource issue, and involve their unions in program ical staff. The claims representative coordinates the design and implementation. They also recognize that team's management of lost time cases and determines benefits to be paid. The nurse consultant works with one barrier to returning disabled employees to work employer, employee, family and physician to develop often is resistance on the part of their own supervisors rehabilitation plans and explore alternative work pos- and employees who may be prejudiced against dis- sibilities with the employer. The medical cost control abled persons or feel that a restricted worker will jeop- coordinator audits all medical bills and negotiates prompt ardize unit productivity. For this reason, it is crucial to payment and other discount issues with medical pro- viders. The home office medical staff serves as an instant secure top management support for the program; open medical resource through Medicall (a telephone hot and maintain lines of communciation; and build suffi- line-see below). cient flexibility into the program to accommodate the AELIRT-Aetna's Large Injury Rehabilitation Team- needs of supervisory and line personnel. is a home office resource composed of claims techni- Gaps in available social, medical and vocational reha- cians, nurse consultants, physicians and rehabilitation specialists who work as a team in the field to provide bilitation services may make it difficult to incorporate employers with guidance, direction, and professional community-based resources into a disability manage- medical resources for managing catastrophic injuries. ment program. These gaps can include poor linkages They act as an early intervention and medical speciality between acute care and rehabilitation services, poorly resource, monitoring the delivery of care by providers understood relationships between employers and pro- to ensure quality care and cost-effectiveness. viders, and inadequacies in the kinds of social and Medicall is a telephone hot line for field claims rep- resentatives. A team of full-time physicians is available vocational services available in the community as well to handle technical inquiries about specific injuries and as barriers to easy access to these services. rehabilitation issues, and provide written reviews for Despite these problems, companies demonstrate that difficult cases. it is possible to work with providers and community AETNA reports that the use of nurse consultants alone (the company employs 55 consultants) in its MBO pro- resources to create innovative programs and cost-effec- gram produced in excess of $19 million in savings. For tive linkages, and build strong management compo- every dollar invested in the program, AETNA's return nents into their contractual relationships with these on indemnity and medical savings was $8. Hospital bill resources. Brent England, Director, Section for Reha- audits by the medical cost control coordinators enabled bilitation Hospitals and Programs of the American Hos- AETNA to save $3.5 million in 1986. In total, AETNA's pital Association, notes that employers with successful cost containment programs produced an 8.4% reduction. in spending, for a savings of nearly $28 million. disability management programs work closely with providers, community resources and other parties to strengthen coordination and communication. These motion programs, since experience indicates that these employers strive to achieve the best possible fit among programs effectively reduce illness and injury and lower purchaser, providers, and individual workers, based on the costs associated with disability. Disability manage- available resources, the impaired worker's socioeco- ment strategies, by themselves, are part of a reactive nomic condition, the family's ability to work with the concern that responds to the high costs of health care impaired member, and the employer's ability to modify and disability benefit utilization, loss of human resources, the worksite and provide needed logistical support. and reduced productivity among trained workers. One important priority should be preventing injuries But this concern should also include a related prior- that lead to disability by instituting worksite inspec- ity: instituting early intervention strategies such as tion, employee screening, and wellness and health pro- wellness and health promotion programs to manage the 5 first signs of chronic conditions; employee assistance Insurance Company: companies must stop being bill programs that address worker problems that contribute payers and start being intelligent purchasers of health to injury and illness; and preventive worksite inspec- care. tion and employee screening programs to spot potential Several principles should guide the development risks and safety hazards, identify employees who are and implementation of employee-based disability man- vulnerable to certain kinds of injuries, design preven- agement initiatives. These include: tion strategies and training programs, and uncover prior 1. Initiatives must start from a clearly articulated human episodes of illness and injury. resource strategy; Disability management, rehabilitation and health promotion can be seen as a comprehensive continuum 2. Early intervention and return-to-work strategies are of workplace interventions to promote, maintain and key cost control components; they can even reduce restore human resource capacities. Each strategy is employer costs when the company is experiencing applicable at various times for worker needs. As the the same or an increasing level of claims; focus of intervention shifts to prevention, the concepts 3. Disability management initiatives can be central- of wellness and health promotion become logical part- ized or decentralized depending upon the compa- ners in efforts to manage disability. These approaches ny's needs and operating philosophy, but the initia- point beyond medical and rehabilitation approaches to tives must be coordinated, integrated, and managed the creation of new strategies for developing and pro- within the company; tecting employee capacity, and entering ergonomic 4. Top management must be committed to and support considerations into the design of the work environ- the initiatives; ment. 5. Unions must be actively involved from the pro- These and other experiences indicate that disability gram's inception; benefits need not be an automatic and unchallenged 6. A system must be created to effectively manage the cost of doing business, and that disability benefits can disability claims function; and should be managed. Companies participating in 7. Strong medical provider relationships must be built the disability management conference provided infor- and maintained; mation and models for cost-effective disability man- 8. Supervisors and line personnel must be kept well agement strategies. Common to these strategies were informed, with lines of communication established a clear understanding of the goals and objectives of the company's disability management program, and strong early and kept open; and organizational mechanisms for the use of internal and 9. Wellness and health promotion programs should be external resources. Also common to each company's used to prevent injuries and illnesses and, in part- approach was a philosophy summed up by Robert N. nership with disability management and rehabili- McCarthy, Assistant Vice President, Claims, Aetna tation strategies, help reduce disability costs. 6