MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
February 24, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Wednesday, February 24, 1993, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Sue Lowden, Vice Chairman
Senator Ann O'Connell
Senator Mike McGinness
Senator Raymond C. Shaffer
Senator Leonard V. Nevin
Senator Lori L. Brown
STAFF MEMBERS PRESENT:
Brian Davie, Senior Research Analyst
Sheri Asay, Committee Secretary
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Dean Hardy, Lobbyist, Nevada Trial Lawyers Association (NTLA)
George McNally, Lobbyist, Nevada Trial Lawyers Association
Ray Badger, Lobbyist, Nevada Trial Lawyers Association
Bob Ostrovsky, Lobbyist, Nevada Resort Association
Scott Young, General Counsel, State Industrial Insurance System (SIIS)
Tim Terry, Deputy Attorney General, Medicaid Fraud Control Unit,
State of Nevada Attorney General's Office
Dave Sarnowski, Chief Deputy Attorney General, Criminal Division,
State of Nevada Attorney General's Office
Don Jayne, General Manager, State Industrial Insurance System
Scott Craigie, Chief of Staff, Governor's Office
Sam McMullen, Lobbyist, Nevada Self-Insurers Association
Mark Habersack, Compensation & Benefits Specialist, Harrah's, Las Vegas
Jim Jeppson, Administrator, Division of Industrial Insurance Regulation (DIIR)
John McGlamery, Attorney, Department of Industrial Relations (DIR)
Terry Rankin, Commissioner of Insurance, State of Nevada Department of Insurance
Steven Shaw, Administrator, Rehabilitation Division, Department of Human Resources
Gayle Sherman, Management Analyst, Policy Planning and Review
Division, State Industrial Insurance System
Matt Dorangricchia, Assistant General Manager, State Industrial Insurance System
John Orr, Deputy Administrator, Rehabilitation Division, Department of Human Resources
Dave DeVinney, Rehabilitation Counselor, Stinson Isom & DeVinney Ltd.
Jim Wilcher, Rehabilitation Counselor, James Wilcher & Associates, Inc.
Senator O'Connell opened the meeting with an invitation to the consensus group to testify before the committee regarding technical corrections of Bill Draft Request (BDR) 53-1764 (Exhibit C. Original is Research Library.)
George McNally, Lobbyist, Nevada Trial Lawyers Association (NTLA), addressed the group with a discussion of the proposed new language of the consensus group in Nevada Revised Statutes (NRS) 616.500, which incorporates some of the language of NRS 616.340 and NRS 616.345. Mr. McNally stated that NRS 616.500 indicates how reporting a claim occurs. Ray Badger, Lobbyist, NTLA, offered to consult with the author of this section, Scott Young, General Counsel, State Industrial Insurance System (SIIS), and bring this information to the committee.
Senator O'Connell asked Bob Ostrovsky, Lobbyist, Nevada Resort Association, to identify the specific sections he wanted to see remain, in sections 10 through 13 and sections 131 and 149. He agreed to do so immediately.
Mr. Young addressed the committee regarding section 179. He said that NRS 616.510, subsection 2, would also need to be amended to conform to the consensus group's intention in section 179.
At Senator O'Connell's request, Mr. Young spoke about a section that was left out of BDR 53-1764, the issue of the "plain meaning statute." He said it should be a part of the bill, and would probably be included as a new section.
Dean Hardy, Lobbyist, NTLA, thought the committee might run into a "separation of powers problem." He said the legislative body dictating to the judicial branch how to interpret statutes could motivate a constitutional argument.
Senator O'Connell replied, "...one of our biggest problems is the court trying to interpret the intent of the legislature..." She said the committee has discussed having an addendum to the bill which "...clearly states what our intent is as far as the legislation is concerned. So, I think we'd welcome that fight."
Mr. Young responded to Mr. Hardy's comments, saying he thought there would be no constitutional problem in this regard. "The legislature's role in our process is to define the laws and to express what they want in the way of legislative intent."
Tim Terry, Deputy Attorney General, Medicaid Fraud Control Unit (MFCU), Attorney General's Office (AGO), testified regarding the lack of any discussion on immunity (for those reporting fraud) in the bill. He said the AGO would like to see incorporated in the bill, language in Nevada Revised Statutes (NRS) 679b.155, which deals with reporting workers' compensation fraud.
Mr. Terry pointed out that in section 69, the financial penalties were only applicable to providers, and thought the penalties should apply to employers and claimants as well.
Senator Brown noted there were penalties for employers and claimants in other sections of the bill. Mr. Terry replied that was correct, but the penalties were less.
Mr. Terry cited NRS 228.410 subsection 3(d), which gave authority for the MFCU to cooperate with other law enforcement agencies. He thought a similar provision should be made in the bill for the proposed workers' compensation unit. Such a statute would facilitate access to nationwide data banks in regard to workers' compensation fraud, according to Mr. Terry.
Regarding section 209, section 1, Mr. Terry thought it would be appropriate to add into the bill the violations found in NRS 616.630, which deals with employers failing to provide and secure compensation.
Mr. Terry expressed concern over the lack of a clear definition of "provider" in the bill draft. He agreed to provide a modified definition from the medicaid section. Mr. Terry asked whether the committee wanted to include a provision for earmarking funds, that were recovered as penalties, to operate the unit, as is done in the MFCU.
A discussion on the definition of fraud ensued. Senator Nevin brought up the question of specific and general intent. Mr. Terry explained how it applies to the MFCU and said the proposal, as it is now phrased, creates a general intent crime.
Dave Sarnowski, Chief Deputy Attorney General, Criminal Division, AGO, thought a provision "...could be included which would indicate, except as otherwise provided in any given section, that these are not specific intent crimes as set forth in the statute." At Senator Nevin's request, Mr. Sarnowski agreed to provide that language for the committee.
Mr. Young expressed that the specific intent issue arose concerning the language in NRS 616.675. Mr. Sarnowski offered to provide a definition of "willfully" to include in the statute, in regard to workers' compensation fraud.
In response to a question by Senator O'Connell, Mr. Terry replied the jurisdictional grant to the AGO is in section 209. He discussed whether self-insureds would be able to continue to investigate cases on their own, and how they would be referred for prosecution.
A discussion followed on the transfer of SIIS investigators to the proposed fraud unit. Mr. Young thought SIIS would like to keep their investigators for abuse cases. He said they were not contemplating an actual transfer. Mr. Young added that SIIS would be willing to let the AGO handle both the investigation and the prosecution in fraud cases.
Don Jayne, General Manager, SIIS, expressed a desire to strengthen
the fraud efforts of the state, for workers' compensation and for self-insureds. He thought the structure set up by the attorney general would be more than adequate to investigate and prosecute fraud at all levels.
There was discussion on how many investigators would be needed by SIIS, and a definition of what SIIS investigators and AGO investigators would be doing within the proposed fraud unit.
Senator Nevin expressed concern over duplication of activities by the two departments.
Mr. Young defined "abuse" cases and "fraud" cases for the committee, and explained why SIIS would need to retain their investigators for abuse cases.
Scott Craigie, Chief of Staff, Governor's Office, said he favors the idea of SIIS continuing some of their investigative activities, because of the expertise they have to draw on from within the system. He also thought SIIS was in a position to take corrective action quickly.
Mr. Craigie discussed self-insureds and how they are handling the investigation issue. He said the Governor's Office "...very much wanted to protect having the self-insureds being brought back in... the Governor's general preference would be to have one person accountable...if we have those areas, we see those going to the attorney general," said Mr. Craigie.
In response to a question from Senator O'Connell, Mr. Craigie replied that activity investigated as general abuse may end up in criminal charges and should be transferred to the AGO.
Mr. Jayne described how SIIS handles abuse and fraud cases, explaining that an abuse case would not necessarily result in a fraud case.
Senator Nevin expressed concern about workers getting paid under the table, and how the fraud can be proved. Mr. Jayne explained that of the 19 investigators at SIIS, only four are fraud investigators. He added that there is a dramatic difference between compensability investigators and fraud investigators.
Mr. Terry described a unit in the MFCU which meets to discuss cases and define when a case moves from abuse to fraud. He suggested this approach be used for SIIS cases. Mr. Craigie thought this was a good approach for accountability purposes. Mr. Sarnowski agreed, but stated the attorney general does not want to be involved in the day to day claims administration operations of SIIS. He did not see a problem with SIIS investigators looking at a set of facts and determining that the information needed to be turned over to the AGO for investigation of possible criminal activity. Mr. Sarnowski cited examples of other agencies which cooperate in that manner.
Senator Brown asked if the language in section 209 would allow that type of cooperation between agencies. Mr. Sarnowski said it would.
A discussion ensued on how fraud would be handled among self-insureds. Sam McMullen, Lobbyist, Nevada Self-Insurers Association, said the self-insureds met and decided they would pay 10 percent of the cost of prosecution, to be re-evaluated if necessary after a period of time, perhaps 2 years. He explained how they arrived at the 10 percent figure.
Mr. McMullen addressed the issue of primary jurisdiction (section 209). He thought it did not need to be addressed by statutory amendment. According to Mr. McMullen, self-insureds should not be precluded from investigation of fraud, and compared it to the jurisdiction that gaming control has over cheating cases.
Senator O'Connell stated the intention of the committee "...is this would be handled by regulations through DIIR (Division of Industrial Insurance Regulation) instead of statutorily." She added, "However we deal with the people who will be involved in the investigation teams from the AG to SIIS, will be handled through the budget."
Senator Lowden inquired about the proposed 800 number. Mr. Terry explained how the AGO would handle an abuse tip that involved the self-insureds.
Mr. Ostrovsky pointed out there are no premium fraud cases with self-insureds. He gave examples of cases that would go to the AGO, noting provider fraud in particular. Mr. Ostrovsky mentioned the 800 number, and the possibility of getting a computer system in place to track claims.
Mark Habersack, Compensation and Benefits Specialist, Harrah's Las Vegas, stated "...we welcome the fact that we could do our initial investigation, as we always had, and be able to turn that over to the Attorney General's Office..." He said getting the AGO to prosecute a self-insurers fraud case has been a problem. Mr. Habersack mentioned the self-insureds inclusion in the upcoming DIR's indexing system.
Jim Jeppson, Director, Division of Industrial Insurance Regulation (DIIR), discussed the self-insureds involvement with the injured workers' index. He also explained the function of the DIIR compliance audit investigators, noting they are not actually involved in fraud investigation.
In response to a question from Senator Lowden, Mr. Jeppson explained how the index will work and said that the data base is mandatory for all insurers.
Mr. Terry discussed section 135 of the BDR, suggesting the committee "...consider the advisability of criminalizing similar subsequent conduct." A $10,000 fine was suggested by Mr. Terry.
Senator Nevin agreed.
In section 183, subsection 3, Mr. Terry suggested changing "district attorney" to "the AGO" for prosecution. In section 186 he said he would like to leave the felony penalty in place, and deal separately with gross misdemeanors.
Senator O'Connell cautioned against language not being specific enough regarding felony or gross misdemeanor. Mr. Terry assured her provision has been made for that. Mr. Sarnowski elaborated on that provision.
Mr. Terry referred to section 186, saying the language should be amended to read "any agency" rather than "state agency." Regarding section 70, he said the AGO thought the conduct described should not be criminalized. Mr. Young explained how SIIS would like to see this situation handled.
Mr. Terry discussed the sections regarding "trial de novo." He expressed concern that this would prolong claims and resolutions. Mr. Terry concluded his remarks with a suggestion that NRS 616.646 be amended to include authority for AGO investigators "...to review those same records and verify the information in them."
SENATOR TOWNSEND MOVED TO HAVE MR. TERRY WORK WITH THE SENATE BILL DRAFT ADVISER TO DEVELOP LANGUAGE REGARDING THE ENFORCEMENT AND PENALTY PROVISIONS OF THE PROPOSED BILL.
SENATOR NEVIN SECONDED THE MOTION.
In response to a statement by John McGlamery, Legal Counsel, Department of Industrial Relations (DIR), Mr. Young stated his opinion that there should be criminal as well as civil fine penalties. Mr. Terry said that language was incorporated in section 69.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
The committee was addressed by members of the NTLA to present the changes they wanted to see made in the bill. Ray Badger presented copies of NRS 616.500 (Exhibit D). Mr. McNally said this statute took out the unneccessary provisions in NRS 616.340 and NRS 616.345.
Senator O'Connell clarified that the NTLA wanted to delete the language in sections 10 through 13, section 134 and 149 and replace it with language in Exhibit D.
Terry Rankin, Commissioner of Insurance, State of Nevada Department of Insurance, responded to Senator O'Connell's request for information regarding the merger of her department and DIR, under the Governor's Reorganization Plan. She said that budgetwise, "DIR is in charge of insurance, not the reverse ...because the commissioner is eliminated." Further discussion followed between Senator O'Connell and Ms. Rankin regarding the merger.
Steven Shaw, Administrator, Rehabilitation Division, Department of Human Resources, addressed the committee. Senator Lowden wondered if Social Security disability claimants are accepted for rehabilitation in the Rehabilitation Division.
Gayle Sherman, Management Analyst, Policy Planning and Review Division, SIIS, discussed the number of people in SIIS who also have Social Security Insurance (SSI) claims, in response to a question by Senator Lowden. She said all but two of SIIS' fifty-one counselors and specialists would qualify for employment with the Bureau of Vocational Rehabilitation (BVR).
Mr. Shaw, discussed social security reimbursement in response to earlier questions by Senator Brown. "...If we contracted out to the privates, they in turn rehabilitate somebody, could we still get the money? The answer is yes." In response to an earlier question by the chairman, "Could vocational rehabilitation oversee all of the services provided by managed care?" Mr. Shaw said the answer is "...no, we're a direct service agency, we're not an oversight agency, or regulatory body."
Mr. Shaw discussed whether vocational rehabilitation is better done by the private sector. He explained the supports available to his division that are not available to private rehabilitation workers, adding that he is fundamentally in favor of privatization.
Senator Shaffer asked if Mr. Shaw would object to a statement in the proposal which would require the Rehabilitation Division to use the most economical program available to attain rehabilitation, including the private sector. Mr. Shaw responded, "...I would have no objection to that. We do that now. ..."
Mr. Shaw referred to a handout on the Division of Rehabilitation (DR) budget (Exhibit E). He stated he is against sending Social Security Administration (SSA) eligible clients to DR to save rehabilitation costs, explaining that only a small percentage of people receive rehabilitation. Mr. Shaw gave examples of secondary disabilities. He also explained how his agency is prepared to handle Americans with Disabilities Act (ADA) issues.
Mr. Shaw mentioned a figure of $95 million estimated for SIIS 1993 expenses. He said he understood that figure to include rehab-
ilitation maintenance payments. Matt Dorangricchia, Assistant General Manager, SIIS, affirmed that. Senator O'Connell noted for the record, "the information that had been previously provided to the committee was not correct."
Mr. Jayne responding to a question by Senator O'Connell, said "...81 percent of the $75 million dollars is, in fact, the maintenance benefit, the compensation portion of it." There was further discussion on the breakdown of costs.
John Orr, Deputy Administrator, Rehabilitation Division, Department of Human Resources, stated the problem for injured workers is not the direct cost of providing rehabilitation services. He explained, "The $60 million dollars is what drives the rehabilitation costs." The $60 million reflects the length of time from the injury to return to work, he added. He thought his division could shorten that time span. Referring to Exhibit E, Mr. Orr compared the number of SIIS cases with the number of DR cases that go to hearing.
Senator Shaffer produced figures that show the private sector returns people to work in 1/2 the time of DR. Mr. Orr noted problems with the data, and explained the difference in the length of time from intake to return to work between a state agency and private rehabilitation. He said the state must take a severely disabled person off the street, whereas the private sector could refuse them.
Mr. Shaw discussed the increase in rehabilitation costs under President Bush's administration. He thought the DR could help cut these costs, by cutting rehabilitation maintenance.
Mr. Jayne said he has serious concerns about the transfer of vocational rehabilitation to the BVR. He supports Mr. Shaw's work, but hesitated to endorse an insurance company "...putting outside of our control something that drives an estimated $95 million in cost..." Mr. Jayne disagreed with Mr. Shaw's assessment of the Bush administration, stating that the problem lies in a national "...explosive trend in medical care with the length of time the injured worker is off." Mr. Jayne explained his concerns about the proposed transfer (Exhibit F).
Dave DeVinney, Rehabilitation Counselor, Stinson, Isom & DeVinney Ltd., praised the DR for their work in providing services to the severely disabled in Nevada. He said private counselors have a role in workers' compensation rehabilitation, because they provide effective services in a timely manner. Mr. DeVinney supported caps on caseloads for injured workers, and strict time frames for services.
Mr. Orr stated that 3 years ago the DR decided they should provide rehabilitation services in-house if at all possible. He explained that the DR restricted working with the private sector on that basis only. The DR has no problem with section 2 of the proposal, he added.
Mr. DeVinney reiterated his concern about a need for time frames.
Jim Wilcher, Rehabilitation Counselor, James Wilcher & Associates, Inc., testified regarding the time frame brought up by Senator Shaffer. He compared the severe disability case to a workers' compensation case. Mr. Wilcher said it was not necessarily true that a workers' compensation case, with a less severe injury, would be handled more quickly. He concluded his remarks by noting that private counselors have the most experience, in terms of numbers, with handling injured workers.
There being no further business, Senator Lowden adjourned the meeting at 10:45 a.m.
RESPECTFULLY SUBMITTED:
Sheri Asay,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE:
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Senate Committee on Commerce and Labor
February 24, 1993
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