MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
February 2, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 8:00 a.m., on Tuesday, February 2, 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
Jan Needham, Senate Bill Drafting Advisor
Denise Pinnock, Committee Secretary
Frank Krajewski, Senior Research Analyst
OTHERS PRESENT:
Scott Young, General Councsel, Nevada State Industrial Insurance System
George McNally, Lobbyist, Nevada Trial Lawyers Association
Tim Terry, Attorney General's Medicaid Fraud Control Unit
Robert Pike, Chief of Investigations, Attorney General's Medicaid Fraud Control Unit
Larry Zimmerman, President, CDS of Nevada
Jack Jeffrey, Lobbyist, Southern Nevada Building and Trades Council
Bob Ostrovsky, Lobbyist, Nevada Resort Association
Raymond Badger, Lobbyist, Nevada Trial Lawyers Association
Bill Champion, Lobbyist, Employer's Coalition
Carol Jackson, Director, Department of Industrial Relations
Senator Townsend opened the meeting at 8:00 a.m.. He told the committee today would be the start of the mechanism the committee will use to get a parameter on what is known as Worker's Compensation. He stated the committee will be using a document prepared for their use by Brian Davie, Principal Research Analyst, Legislative Council Bureau, Exhibit C.
Senator Townsend stated;
It should be noted that Brian [Davie] and Frank Krejewski have worked diligently on this issue. Brian has recently returned to use and had to get back up to speed on Nevada's version of this quite quickly and we are proud of the work they have done and as you will see with the testimony they will provide at tomorrow's hearing on managed care, the kind of research that is necessary that will allow us to make comfortable decisions regarding the tougher and more controversial issues. And it doesn't necessarily mean because they were able to provide statistics that show us it is a cost-saving, that anyone is obligated to support that position but, it allows us to certainly make fiscally sound decisions based on what we have. The document you have in front of you today is stated 'Comparison of Worker's Compensation Bill Draft Requests, BDRs and Proposals.
Senator Townsend summarized the proposals from Exhibit C. He explained this is a working document from which the committee will work on Thursday, February 4 and Friday, February 5. There will be no votes taken today and tomorrow. Thursday, February 4 will be the last day for testimony on managed care. He stated these meetings will be teleconferenced to Las Vegas and this document, Exhibit C, will be used and the committee will simply go down each one of the proposals and vote to have them placed in the bill. He did explain they would not vote on any proposal with a "G" in front of it because that would be part of the governor's plan and he will have that presentation on 3:30 on Thursday, February 4. Senator Townsend stated this would be a public meeting and public testimony would be taken after that. He also explained there would be a joint hearing between this committee and the corresponding committee in the Assembly. He noted the committee would then adjourn and go to Las Vegas to take additional testimony hoping to give the committee more insight into the specifics necessary to complete the bill in the first week. He then turned the meeting over to Brian Davie.
Brian Davie, Principal Research Analyst, had a few brief remarks regarding Exhibit C. Mr. Davie stated the purpose of Exhibit C was to organize and consolidate the many recommendations on how to reform worker's compensation system. He explained the document is organized under topic headings and it was intended to eliminate the duplication of recommendations. Mr. Davie further explained this document would help the bill drafters who will be on a big time constraint once the decisions were made by organizing these ideas.
Mr. Davie told the committee he wanted to briefly explain where each of the recommendations came from. He told the committee in Exhibit C it shows under each recommendation where it came from and if it is a duplicate recommendation it will include the sources and he stated they used the letter codes on the first page of the document. He explained the numbers following the letter codes indicate the number of that recommendation in the original document, the BDRs that were circulated and the number of the interim study recommendations, see Exhibit C.
Mr. Davie explained the governor's proposal bill draft request there are about fifty different items but, he was able to consolidate them into about thirty separate recommendations.
Mr. Davie defined the rest of the proposals beginning with the Consensus Legislation in which there were 38 separate recommendations. He stated the SIIS (State Industrial Insurance System) proposal there were 35 recommendations, in the Alternative Legislation there were about 28 recommendations and the Interim Study had 62 recommendations. Mr. Davie explained there were two recommendations in Exhibit C from the State Industrial Insurance System from their testimony last week dealing with loss control and prevention. Mr. Davie stated that gave the legislature a total of 195 recommendations to deal with and he stated basically because of duplication and consolidation, he was able to bring it down to 110 recommendations.
Mr. Davie explained the organization of the report. He stated he basically started with the topic headings that are in the interim study report. He pointed out he had a draft copy of the interim study report and he stated this document should be available to everyone through publications within the next day or two. He stated it has been completed and signed off on and is now going through the printing and reproduction process. He added it should be available through the publications office in the next day or two.
Mr. Davie told the committee he did not have the governor's proposal when he started this project so he began with the Consensus recommendations. He explained the Consensus legislation was developed over the past six months or so in meetings with a group of people involving representatives from the State Industrial Insurance System, various interest groups who all got together and produced the Consensus legislation indicating their agreement on various topics and proposals for reform. He stated there were a lot of duplications between the business plan recommendations and the interim study plans. He told the committee he brought all of those recommendations together and added in the Alternative Legislation and then after he received the governor's recommendations he added those in. He noted the intent with this list after the committee takes action is he and Mr. Krajewski will strip out those not approved and after the meeting on Friday, February 5, they will produce a document which will identify all the recommendations approved by the committee to be placed in the bill draft request. Mr. Davie told the committee he will have that document available for all of the meetings in Las Vegas and also available in Room 227 in the Legislative Building in Carson City where the meetings will be teleconferenced.
Mr. Davie explained he would provide to members of the committee on Thursday, February 4, per Chairman Townsend's request, recommendations as a result of certain court decisions and also those requests with cost impacts.
Mr. Davie told the committee he had not memorized the Justification Qualities Recommendations and he would like to rely on Scott Young and others who would like to explain some of these and to provide their justification.
Senator Townsend asked Mr. Davie if the committee could expect to get the bill back by February 22 after they have decided what should go into the bill? Mr. Davie told Senator Townsend he believed they could get the bill back to the committee by the 22nd of February. He did state he was not sure they could come back with exact figures because some of the recommendations have some hard figures that people have developed. He reminded the committee some of the recommendations that deal with court decisions have a cost impact. Senator Townsend asked Mr. Davie if he could just come up with some sort of cost range and Mr. Davie agreed he could do that.
Brian Davie and Scott Young, General Council, State Industrial Insurance System, explained the Consensus Legislation, the Fraud section, to the committee. See Exhibit C, pages 1, 2 and 3.
Senator O'Connell asked if the committee were going to more clearly define fraud in this proposal.
Jan Needham, Principal Deputy Legislative Council, told the committee it is defined in #4 under Fraud in Exhibit C. She stated it is essentially presumptuous that certain things are fraudulent, there is presumptions if there is intent if certain activities have gone for a very long time or they are repetitious or if it is willful or
knowingly charging things you should not have charged or trying to obtain things you should not obtain and they will be spelled out very specifically.
Senator O'Connell stated another concern she had which she did not see in this Fraud section was sharing information between agencies like employment security, as in, are they receiving benefits from both agencies. She also expressed concern regarding if an employer is very busy and they owe the system a lot of money and then they shut down and went to work under another individuals license, would that other individual be considered an accomplice. She then told the committee under #10 of the Fraud section in Exhibit C she felt the committee should talk about disciplinary actions occurring within a specified time. For instance, it should occur within ten working days. She stated right now many such incidents had occurred but, to their knowledge no disciplinary action had ever taken place and she feels this should be specified.
Senator Shaffer stated he does not feel the board addressing the issues of fraud will stop the fraud.
Senator Townsend told Senator Shaffer he brought up a good point and he stated Senator Nevin chairs that committee which deals with boards, occupations and businesses. Senator O'Connell and Senator McGinness also sit on that committee and Senator Townsend asked them to look at this question from Senator Shaffer and question whether or not they are strong enough to take disciplinary action immediately on someone who has frauded the system and what mechanism they would use. Senator Townsend explained he was not talking about the attorney general's office but, the individual boards under which they are licensed.
Mr. Davie stated they have requested that information from the Board of Medical Examiners and expect a response very soon.
Senator Brown stated she was not sure whether they could or should prohibit an employer from declaring bankruptcy. She explained there are some instances in which the bankruptcy is a needed remedy. She asked if they could allow it and still require the employer to pay his debt to the system, as in, it would not be something that could be wiped out by bankruptcy.
Mr. Young explained apparently under current federal law, worker's compensation premiums are treated as a form of tax and taxes are generally not dischargeable in bankruptcy and the reason there was even a reference to bankruptcy in the statute was to make it clear that the legislative intent was that, in fact, even bankruptcy would not discharge these premiums.
Senator Brown referred to #10 in the Fraud section of Exhibit C and asked if that is a suggestion the cases of fraud be referred when they are alleged or when someone has been convicted. She also stated she would like to get information from other states as to whether an individual has been convicted of fraud in another state system. Mr. Young stated he was not sure if there were any mechanisms like that but he will check on this.
Senator O'Connell asked Mr. Young if it was the intent of #1, Fraud section, to collect that information from other states. Mr. Young stated the information would actually come through the injured worker but, yes the provision would require them to disclose a rating or injury they had had in any other state.
Senator McGinness asked how they funded the special unit for investigating fraud. Mr. Davie stated this was funded by the assessments in the governor's proposal.
Tim Terry, Attorney General's Medical Fraud Unit stated his office submitted a fiscal note with respect to Bill Draft Request (BDR) 18-1149.
BDR 18-1149: Creates fraud unit within attorney general's office to investigate and prosecute fraud relating to industrial insurance.
Mr. Terry explained the proposal and walked through it with the committee members, see Exhibit D. Mr. Terry explained the fiscal note to be $2.33 million for a start up cost the first year and then a budget of approximately $2.13 million the following year.
Senator Townsend asked Mr. Terry to come back to the committee with a revised figure that is substantially less than those amounts and he stated he would be glad to give him guidance on how to proceed with his proposed fraud unit. Mr. Terry agreed to work on that budget amount.
Bob Pike, Chief of Investigations, Attorney General's Medicaid Fraud Unit, told the committee if their office receives the investigations he did not feel the SIIS investigators need to have clandestine plates or cold plates as they already have that at the attorney general's office. He also stated the existing investigators at SIIS would not need cold plates.
Mr. Young stated there would need to be the appropriate number of people in the attorney general's office to handle these problems.
Mr. Terry stated the scope that is called for under the BDR with the medicaid fraud control unit, they only look at medical provider fraud essentially with a staff of eight and he stated he could probably keep
four or five more investigators busy. He added this is taking on employer fraud and employee fraud with medical provider fraud so it is a substantial endeavor.
Senator Townsend stated the committee is most supportive of the actual field agents. He explained he did not want the attorney general's office to become public education where there are layers of administrators the state has no money to pay. He expressed the committee's focus is on the individuals who are actually in the field doing the work.
Mr. Pike told the committee he would like to have a kickback rebate statute which is a problem in Nevada. He explained the selling of patients or the providing of patients for money is a practice that occurs in this state and it is a reprehensible practice and we would like to have that included in the provider fraud as well. He further explained it is a practice in Nevada for a doctor to refer a patient and receive money for that referral or for individuals referred to a clinic and to receive monies for the referral. He stated eventually the cost is borne by the employer.
Senator Brown asked what estimated amount of monies this proposal might bring back into the system. Mr. Terry stated that is a particularly difficult element to anticipate. He told the committee in the first year of the Medicaid Fraud Control Unit they recovered about $10.00 to $1.00 as far as general fund expenditures were concerned. He stated they had some cases they were able to hit early on but, the question with this proposed unit would be what kind of case load would they have to determine recovery amounts.
Mr. Pike told the committee his department wants to be much more aggressive in the exclusion and suspension of providers to treat injured workers in this state, as it is a privilege not a right. And how you present those figures of dollars saved, we will attempt to do that and show what the doctor made, historically and indicate that is the savings.
Senator Townsend told Mr. Pike and Mr. Terry they were to be commended in regard with what they did with Medicaid. He stated the numbers produced due to their investigations were commendable and very measurable in a positive light compared to other jurisdictions and he therefore stated they deserved a lot of credit. Senator Townsend told them if they could come back to the committee about Thursday morning with a reduction in budget as far as people above and below the investigators, the committee would like to look at the proposal again.
Larry Zimmerman, stated approximately 30% of the workers in the state are covered by self insurance. He asked if the fraud investigation
under the attorney general's office is to be funded by assessments of employers, is the attorney generals investigative office also going to be available to self insured employers for the investigation.
Mr. Pike told Mr. Zimmerman that is most assuredly part of their plan. He stated they looked to the future and again, at one time, SIIS covered 100%, now it is 30 and if it goes three way or in the future it may be 40 or 50. He also stated there might be a time when the worker's compensation is 35% of the population and part of this program is to help the self insureds and he stated he looked forward to their referrals both in the provider and claimant area. He stated the employer area would not be an issue with self insured.
Senator Townsend asked if all employers would be assessed for this. Mr. Pike stated that was true, all employers are assessed but, not charged for what they use. He stated self insured are currently assessed 30% of the cost of administration of worker's compensation. He also stated if they were to contact his department they would be given the same consideration as a referral from SIIS. Mr. Pike pointed out the self insured employees are paying the same dollars for the department to exist.
Terry Rankin, Department of Insurance, stated the insurers still do a lot of their own investigation. They then have an immunity statute where they turn it over to the fraud unit whereby the fraud unit either uses their investigator as a witness and their documents or gets additional information or whatever is needed to them and criminally prosecute or criminally find that perpetrator. She explained the self-insureds would be paying the assessment and possibly their own investigator to develop the initial case which is the same the insurers are doing. They are all paying an assessment to the insurance fraud but, they have their own claims management and claims investigator. Mrs. Rankin stated she saw it as working the same way. She added there also needs to be the immunity statute for the self-insureds to refer so they are not liable for tort actions for referring something to the fraud unit that may not be prosecuted.
Senator Nevin had some information for the committee on a problem they have had for years. He gave the committee a handout, see Exhibit E. Senator Nevin explained when there are cases that are billed to a city attorney or district attorney, it does not get the attention needed because they have more important things to do. He explained it was a problem with Public Service Commission (PSC) where there were violators being cited by PSC enforcement people who were given citations and then the citations were not being pursued because they did not have time to deal with them. He further explained when they do get a good case there is a tall stack of paper and the judge does not like those kinds of cases. Therefore, when Senator Nevin was in the assembly they set up an administrative court through PSC and then through the administrative court they assessed fines for violations. Senator Nevin explained if someone wants to fight the assessment through the administrative court, they in turn will have to pay their money to go to district court to appeal it. Senator Nevin told the committee if it works for the PSC why not for the attorney general's office. See Exhibit E. He told the committee he has the figures for this but, does not have them right now to see how much money has been generated through the administrative court. He feels if they administer these fines through the administrative court and the rest go out and collect the money, there will be a big difference in cost factors of running the fraud unit because the money would go into help fund a fraud unit and give money back to the people who were frauded through the system.
Tim Terry stated there might be a problem with the attorney general's unit investigate and prosecute and then serve in an administrative fact-finding body that might find or exclude providers. He stated it would depend upon how it was structured. He also told the committee with the Medicaid Fraud Control Unit they were given criminal and civic jurisdiction and they can go after the monetary penalties in a civil form but, when the providers are excluded or when they are administratively sanctioned, that is something the welfare department does themselves and his department cannot get into that.
Senator Nevin stated he agreed with Mr. Terry. He said he was getting structure from the PSC and how they set up the administrative court because they would have the same problem and he is sure they established a different approach to where the investigator is not the judge and jury.
Senator Townsend stated this was an area they had wrestled with hearings, appeals, delays and paperwork and what is a court of record and what is not and how informal they should be, so he stated this gives them another option to deal with it and he added it may have a lot of merit and he will await the figures from Senator Nevin.
Mr. McNally gave the committee what he referred to as the Nevada Trial Lawyer's Position Paper from the various bill draft requests, see Exhibit F. Senator Townsend asked Mr. McNally to wait until Thursday to submit more information to the committee.
Jack Jeffrey, Southern Nevada Building and Trades Council, told the committee he did not agree with numbers 7 and 8 of the fraud section in Exhibit C and felt they were unworkable.
Senator Townsend asked Mr. Davie to explain the next few sections of the proposal, Exhibit C, including Physician Self-Referral, Benefits, Payments and Compensation. Mr. Davie and Mr. Young went through these sections with the committee.
Senator Nevin expressed concern regarding rural physicians and patients. He felt rural physicians may be put out of business if they were not providers and rural patients would have to travel to larger cities for medical services.
Mr. Young explained there is a clause in this proposal that makes exceptions for the rural areas.
Bob Ostrosky, Nevada Resort Association, told the committee they should beware of limiting the ability of the managed care provider to provide services necessary for the injured worker within a context of the agreed to contract.
Senator Lowden asked if an injured worker is referred to a health facility is that for the purpose of diagnostic (as in X-ray, pharmacy, etc.) as well as physical therapy.
Mr. Young stated all of those types of facilities will be covered as well as the physical therapy.
Raymond Badger, Attorney at Law, explained to the committee regarding the provisions in Exhibit C which include a fair balance for workers burdened by a preponderance of evidence.
Mr. Zimmerman stated on Page 3, section 3 of Exhibit C he would like the language changed. Senator Townsend told him to submit his proposal to Jan Needham.
Senator Brown asked if it would be less expensive to hire more people for this division and get the investigation done in 14 days rather than dragging it out to 30 days and incurring more cost.
Mr. Ostrosky explained 14 days is not enough time to get the accident report, the doctor's report and the investigative material.
Mr. Young finished going through the topics in the proposal, Exhibit C, with the committee.
Mr. Badger stated he was opposed #14 on page 6 of Exhibit C. He stated he felt this would be a constitutional issue and a discussion on this issue ensued. Senator Townsend stated this issue would be taken care of by the hearing and appeals process down the road which will change a lot of the procedure Mr. Badger has objection to.
Mr. Jeffrey stated he had a problem with #11 on page 5 of Exhibit C. He told the committee in construction work an individual is able to perform at 100% or he is not able to perform at all. In other words, he told the committee an individual may be able to work off and on with limitations but, not on a full-time basis. Mr. Jeffrey stated there is no way to provide light-duty for construction workers.
Bill Champion, Employers Coalition, told the committee Nevada has no schedule of benefits or awards by body parts as seen in Exhibit H. There was discussion between Senator Townsend and Mr. Champion regarding Exhibit H.
Senator Townsend asked what the difference if the information in Exhibit H was accurate and who was the author.
Carol Jackson, Department of Industrial Relations, stated she had not seen this document before and was not an author of Exhibit H.
Senator Townsend told Mrs. Jackson to assume the information is accurate and tell the committee what the difference is between the schedule of injuries and the schedule determined in Montana and Nevada.
Mrs. Jackson stated the only thing she could state about scheduled injuries is it is basically for extremities where there is a certain set percentage that an individual would receive. She explained this determination is not made on loss of range of motion but, she stated it was hard to answer any questions on Exhibit H when this is the first time she has seen it.
Senator Townsend asked if anybody could tell him why the amounts are so dramatically different between Oregon and Nevada.
Mr. Badger stated he could not tell the committee about Oregon but, he did know a little about California and Montana. He explained Nevada has a 25% lump sum cap whereas California and Montana have a 5% of total earnings lump sum.
Scott Young told the committee the highest lump sum an individual can receive in Nevada is approximately in the $60,000 range.
Mr. Young continued to explain Exhibit C starting with Claims Administration.
George McNally told the committee SIIS, although it acts like an insurance carrier in a Workmen's Compensation situation, has the immunity shield of a government agency which allows the $50,000 cap and some immunities for certain actions by employees of the system.
Carol Jackson brought up the contract fee schedule for physicians which has a deadline every year for revising the medical fee schedule. Senator Townsend asked Mrs. Jackson if the state went to some kind of contracted care would most of the medical fee schedule go away. Mrs. Jackson checked with Oregon and several other states that have managed care and this would not be true and the fee schedule will stand.
Senator Townsend asked Mrs. Jackson and all of the managed care people along with the subcommittee to clear this matter up. He stated he does not see this provision in the proposal.
Mr. Young continued with the explanation of Exhibit C for the committee members.
Senator Nevin expressed concern with individuals going to four or five different physicians and duplicating the billing process as well as prolonging the outcome of the case.
Mr. McNally stated when you have a primary treating physician in the eastern part of the state, for instance, and he is a general practitioner and the injured individual needs a specialist, more often than not that practitioner will refer them to a physician in Salt Lake City or other areas outside of the state. He told the committee they should make it absolute to have an out-of-state treating physician agree to accept that case based upon our fee schedule as it would be imposed on that physician in Nevada.
Senator Brown asked if Nevada currently pays travel costs for those cases and would we change that. Mr. Young stated the way it is now the state is not suppose to pay the travel cost if the care is available locally. So, if the individual chooses to go to another physician they are to absorb the cost of the travel. Mr. Young stated this is the way it is suppose to be in practice but, it is not working out that way. He believes one of the changes proposed will help restrict some of the travel costs.
Senator Townsend told Brian Davie he appreciated all of the work he put into Exhibit C and he felt it was an excellent document. There being no further business Senator Townsend adjourned the meeting at .
RESPECTFULLY SUBMITTED:
Denise Pinnock,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE:
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Senate Committee on Commerce and Labor
February 2, 1993
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