North Carolina Gov. Pat McCrory caused quite the stir last Wednesday in his annual “State of the State” address. During that speech he claimed that that more 40 percent of the approximately $150 million per year the state incurs in workers compensation costs for its injured employees was related to “fraud and abuse”. Saying, “Our examination of workers compensation estimates that 40 percent of workers’ costs are related to abuse or outright fraud”, he vowed to reduce that amount with a new program designed to fight workers compensation waste.

His claims were immediately questioned by “lawyers, union representatives and academics familiar with the issue.”

My initial thought on this was, “Can't we find some other groups to question this? Can't we find better defenders of the status quo?”

I mean, lawyers, unions and academics are not usually at the forefront of ferreting out and exposing fraud. When was the last time you saw a news story about a lawyer or a union turning a client or member over to investigators? It generally doesn't happen. I don't know about you, but I haven't read much on any academia based fraud busting rings lately, either. And it seems to me that people questioning fraud estimates should not have possible financial incentives to ignore it.

That, of course, is the problem. People on all sides of the aisle have financial incentives to influence their behavior and opinions when it comes to workers' compensation.

The state does not seem to be helping their case, either. Apparently the 40% figure originally came from CorVel, who administers claims for the state. It is said CorVel arrived at its estimate based on comparisons of handling other large business and government contracts. Reporters attempting to confirm the number learned that the North Carolina Department of Insurance “does not track workers compensation statistics”. Also a “spokesman for the state Industrial Commission, which adjudicates workers compensation claims, said he was unsure if such statistics were available and that the individual who might have them was not in the office Thursday.”

I wonder if they were back on Friday. Someone should look under their desk.

State Personnel Director Neal Alexander probably didn't make things any clearer by pointing out that “fraud and abuse are two different things.” The example of abuse he provided was that of “a worker who legitimately hurts his back initially but, after he is able to return, persuades his doctor to keep him off the job for a longer period of time.” He also indicated, “Abuse might also include a state supervisor who doesn’t do enough to check up on workers and get them back on the job as soon as possible”.

The source article goes on the explain that “Fraud cases would involve employees who intentionally game the system, such as someone who claims an injured back but is then seen doing heavy yard work.”

Personally I am having a little trouble with these definitions. An employee able to return to work but getting the doctor to extend his absence is still “gaming the system” and committing fraud. Calling it “abuse” is simply putting lipstick on a pig. It doesn't make it prettier and only annoys the pig. A supervisor “who doesn’t do enough to check up on workers and get them back on the job as soon as possible” may be incompetent, but that doesn't equate as abuse of the system.

I agree that the 40% number sounds high, but perhaps not for public sector entities. Public sector costs, when compared to their private sector counterparts, can run high in a multitude of areas, including benefits, retirement and disability. After all, New York City firefighters seem to have a hugely disproportionate number of people retiring on disability. For Long Island Railroad employees it seems to be part of the retirement package. I don't recall an army of lawyers, union reps or academics fighting to stop that.

So is North Carolina that far removed from potential fraud and abuse?

The problem is that no one really knows. As earlier indicated, overall workers' comp statistics are very hard to come by, and North Carolina is not alone with their apparent lack of tracking. One of the IAIABC committees on which I have served (right up until the publication of this article) is the Research and Standards Committee. I learned there that many of the states do not have the budget nor intestinal fortitude to track meaningful statistics for workers' comp in general, let alone for public sector employees. Discerning fraud within those statistics is an even more daunting task. So now, it appears, the North Carolina Governor has stepped in the hornets' nest, and there is very little backup to give him cover.

And the lawyers, unions and academics will have none of it. It turns out you will find no better defenders of the status quo.

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