Cathey v. Service Employers International, Inc. / Insurance Company of the State of Pennsylvania and Director, Office Of Workers’ Compensation Programs.
On January 18, 2012, Judge Levin, the Administrative Law Judge, (ALJ), issued a Summary Decision Dismissing a Challenge to the Application of the War Hazards Act.
The Judge appeared to be persuaded that:
1. The case was about the War Hazards Compensation Act, (WHCA), not the Defense Base Act, (DBA).
2. The case dealt only the payment for medical services under the WHCA.
3. Section 104(a)(3) of the WHCA controls.
4. The regulation 20 CFR 61.104(a) implements that section.
5. The regulation 20 CFR 61.105 applies to this case.
6. The case arose because the claimant would not do what the government told him to.
7. The carrier did nothing wrong.
8. The case was similar to an 8(f) case.
The Parties and the Proceeding
The claimant and the employer/carrier appeared. The Director, Office of Workers’ Compensation Programs, was listed as a Party in Interest. Footnote 1 reads: “Director, OWCP, did not participate in this proceeding”. This is not unusual, since the Director rarely appears in ALJ proceedings, although he sometimes files a brief or letter in second injury relief cases. The OALJ has several times noted the absence of the Director causing problems.
It will be interesting to see what position he adopts on appeal. In this case, the Director was involved both as administrator of the LHWCA and of the WHCA. It is not clear that the interests of both positions are exactly aligned. Different solicitors represent the two Divisions.
The Judge was thus deprived of input from the source most likely to be able to assist him, leaving him only with the employee and the carrier. Employees are not likely to have much experience with the War Hazards Act. The Judge was therefore faced with what in effect was an ex parte application, the real defendant being an “empty chair”.
The decision notes: -
Briefly, Claimant, while working in Iraq, allegedly sustained shrapnel wounds and other injuries when the truck in which he was riding came under enemy fire. Claimant subsequently received indemnity benefits under the DBA which were, on December 10, 2009, the subject of an approved settlement. His medical benefits, however, were not affected by the settlement agreement.
Following the settlement of Claimant’s compensation benefits, Employer petitioned the Director, in accordance with the provisions of the WHCA, for relief from the obligation to cover the medical costs associated with Claimant’s injuries. The Director granted Employer the relief which it sought and notified Claimant that the Department had accepted the responsibility under the WHCA to pay his medical expenses. The Director then advised Claimant of the procedure he should follow to secure the medical benefits to which he is entitled.
The record shows that Claimant now needs medical treatment and submitted a request for surgery to his Employer. His Employer declined to authorize the treatment because the Department has accepted the responsibility for his medical expenses under the WHCA. The Department has, in turn, advised Claimant of steps he should take to obtain his medical benefits, but Claimant has declined to follow the procedures established by the Director to implement the WHCA. Claimant, instead, insisted that the Director refer the matter for a hearing so that he may adjudicate his right to continue to demand medical benefits from his Employer under the DBA. Believing that it has no further obligation to Claimant, Employer has moved for summary decision dismissing this matter. The Employer’s motion will be granted.
The interplay between the DBA and WHCA has not been much litigated. The decision notes the BRB case of Smith v. Director, 17 BRBS 89. If there have been other cases, none were cited.[1]
Discussion
The decision is imprecise, probably because the underlying case is imprecise and the Director, who understands the minutiae, was not available to explain. There are no regulations or procedure manual directives under the LHWCA or DBA to cover this situation. The FECA regulations at 20 C.F.R. 61 cover it to some extent and a recent bulletin, OWCP No. 12-01 dated 10/6/11, gives some guidance in similar situations. The decision does not mention this document, whether because it came out after the pleadings were closed or because it did not catch the attention of the parties or the judge we cannot tell.
The Settlement of the DBA case
The judge wrote in the passage quoted above:
“His medical benefits, however, were not affected by the settlement agreement.”
What does this mean? Does it mean that the Order approving the settlement included an order that the employer should continue to provide and pay for medicals, (“furnish” in the language of § 7), or was the employer paying medicals voluntarily? The distinction can be important, as the Roberts case recently argued before the Supreme Court illustrates. The sentence is imprecise.
We may deduce that there was a settlement, approved by the Division of Longshore and Harbor Workers' Compensation, under §8(i) ending all liability for compensation. As part of the order, the employer was obliged to continue furnishing medical benefits under §7 of the LHWCA.
The Employer claims WHCA relief
The decision continues, telling us that the Employer petitioned for “relief from the obligation to cover the medical costs”. Any settlement under §8(i) is final if not appealed within 30 days. The settlement was not appealed. The only ways to avoid the obligation to cover the medical costs are (i) to enter into a separate settlement under §8(i), or (ii) modify the award under §22. Neither of these paths appears to have been taken. The final order of settlement therefore continues until modified.
There is nothing in the DBA and nothing in the WHCA which relieves an employer, (or the carrier), from their obligation to cover medical costs. The use of the word “cover” may be the problem, since §7 uses the word “furnish”, so the meaning of the term “cover” is not clear and therefore imprecise.
The employer is granted relief
The decision then advises us that the relief was granted and the claimant told that Director had accepted responsibility to pay his medical expenses. We are not told how the relief was granted, nor how the clamant was “told” of this decision. The wording of this “relief” is not quoted by the ALJ. We are therefore not able to discern what the “grant” said, nor by what statutory authority it was granted. We know that there is no such “relief” under either the LHWCA or under the WHCA.
We may assume that the employer in fact filed a request for reimbursement of the compensation and medical benefits already paid, under §104(a) of the WHCA.[2] The Division of Federal Employees Compensation, DFEC, no doubt considered the request under 20 CFR 61. 102, “Disposition of reimbursement requests”. Since this was a request for reimbursement after an 8(i) settlement, §61.102(c) would appear to apply. In any event, DFEC appear to have agreed to reimbursement for amounts paid and, under §61.105(a), for direct payments of future benefits.[3]
Direct payment of future benefits
The regulation §61.105(d) says that: “In cases transferred to the Office for direct payment, medical care for the...injury may be furnished in a manner consistent with …5 U.S.C. 8101 et seq.” §61.105(e) then says “The transfer of a case to the Office for direct payment does not affect the hearing or adjudicatory rights” of the beneficiary under the DBA.
We should also note §61.102(e). In determining whether a claim is reimbursable, the Office holds the carrier to the same degree of care and prudence as any individual or corporation …would be expected to exercise under similar circumstances. A part or an item of a claim may be disapproved if the Office finds that the carrier, (§61.102(e)(4)), failed to avoid augmentation of liability by reason of delay in recognizing or discharging a compensation claimant’s right to benefits.
Thus, direct payment is conditional on the carrier acting in a prudent and careful manner, and not delaying in recognizing rights to benefits. The direct payment adopted by the Department “may” adopt the FECA rules. There is nothing to say that those rules supersede, preempt or overturn a claimant’s property rights in an award already issued under the Defense Base Act.
The Claimant was told
The ALJ tells us that the claimant was “informed” of the transfer and of the “procedure” to “secure” the medical benefits to which he is entitled. Thus, despite an unmodified order under the DBA that the employer continue to furnish medical care, the claimant is told that as a result of an agreement between the carrier and the Division of Federal Compensation of the OWCP, the claimant’s property rights in the order have been altered without a hearing.
Under the LHWCA it is not the claimant who has to secure the benefits, but the employer under § 32(a); there is no statutory requirement for the employee to secure, let alone re-secure benefits at any time.
There is a difference between payment of benefits, and responsibility for furnishing the care. A company may outsource the payment of salaries; they do not outsource the decisions as what the salary ought to be.
Once again we have to distinguish between the OWCP’s decision to pay the medical benefits, and a decision as to which benefits to pay. The former right falls under WHCA, the latter falls under DBA.
The claimant did not do what he was told
Without addressing the difference, the judge speaks of the Department “providing the medical benefits afforded by the DBA”, and later, “The Department merely asks [the claimant] to process his medical requests through the Department rather than the employer,” and “asked him to inform his medical providers” to send their bills to the Department.
Once again, the Defense Base Act confers the employee’s rights. That Act regulates certain matters between the employer and employee. The government is not the employer. The WHCA regulates certain matters between the carrier and the government as the insurer of the carrier. The claimant is not a party.
Medical benefits under the Defense Base Act arise under §7 of the Longshore and Harbor Workers' Compensation Act. The employer has an obligation to furnish medical treatment, and although the employee has the right to choose his own physician, he does not “direct his providers to bill the employer”. The employer authorizes treatment (see for example form LS-1 under LHWCA), and directs the providers to bill him or his carrier directly. If that relationship has changed, because the government is now paying the bills, and the government want them submitted in a particular way, then the government should advise the providers, or require the carrier to do so, rather than dump on the claimant the burden of explaining a deal cut behind doors closed to both the claimant and his providers.
A wiser person than I might wonder whether this request is in fact “a collection” of information from the public, and whether a form should be required. If so, the government would have to explain why the collection is necessary from the person required to submit it, and the burden on the claimant for doing so. This would be subject to publication in the Federal Register, for public comment.
What the dispute is about
Following the settlement, the claimant’s medical condition required surgery. Like any claimant with an order for medical treatment under the LHWC, who requires surgery, he sought the prior consent of his employer/carrier. Of course, in the light of the Sir Gean Amos case there should be little problem. However, the carrier refused either to authorize or not to authorize the surgery. They gave no medical reason for this action. They merely claimed that they were no longer liable for the medicals, and authorization should be requested from the DFEC.
Although §7 of the LHWCA requires the Secretary to “actively supervise” the medical care, there is no provision for the Secretary to order surgery. The claimant therefore asked for an informal conference. We do not know the result of the conference, but the case was referred for hearing on the issue of the claimant’s right to surgery. The ALJ did not decide this issue. He remanded the case to the Director for further appropriate action.
The point is that this dispute is over the employer’s refusal to authorize treatment under the Defense Base Act, not the Department’s methods of paying for it under the War Hazards Act.
Missing the issue
We should note at this point that the claimant has not complained about the payment of his benefits (although he does complain that he is landed with a whole lot of paper work, designed to avoid the carrier or the government doing their job). He complained that the employer, whose obligation is to furnish the medical care, has failed to authorize surgery.
The procedure for getting the surgeon paid is an entirely different issue. The Judge remarks: “Claimant’s current need for the surgery recommended by his physician is not in dispute in this proceeding.” Why else was the case referred to him? And if the employer does not dispute the need for surgery, why does he not authorize it? Instead, the employer seeks to force the claimant to seek the prior consent of the Director to the surgery, or to go ahead and then if refused, (having spent the money), seek to reverse the Director’s decision.
OWCP notice 12-01 tells us that if the Director decides not to pay “DFEC will outline the rationale for its determination in a letter to the claimant, attach any applicable medical documentation, and advise the claimant to seek an adjudicatory decision from DLHWC. DLHWC and the carrier will be notified of this determination as well.”
We find later in the same bulletin that DFEC believe that DLHWC should “initiate modification proceedings”. The carrier as well as the claimant are parties, and the carrier’s failure to present any and all defenses may result in a subsequent denial of reimbursement. A new claim, if accepted [through the DBA modification proceedings, presumably] will not be covered under the WHCA absent a subsequent request by the carrier and determination by DFEC. The fact that this puts the carrier though annoying hoops is no reason to divert them to the claimant instead.
The judge, however, saw it as the claimant refusing to co-operate :
“As such, Claimant’s embrace of this provision [WHCA Section 104(a)(3), 20 C.F.R. Section 61.105(a)] as a justification for his refusal to cooperate with administrative procedures adopted by the Department for the purpose of
managing the payment of his benefits is entirely unwarranted.”
The carrier was wrong
The case is still a Defense Base Act case, with an order for the employer to furnish medicals. The carrier has not produced any valid document modifying that settlement. Although DFEC is paying the medicals, the carrier retains the obligation, and DFEC may decline direct payment at any time.
In fact, in failing to conduct itself as a prudent individual and having delayed the surgery, the correct course of conduct would be for the Director to send the case back to the carrier for payment and refuse reimbursement for the surgery, and for any claims for expense in the meantime, under 61.102(e)(4).
The 8(f) obfustication
The judge then goes on to decide that the claimant has no standing to challenge the Department’s regulations because the Department is merely a source of funds. In doing so, the judge likens the procedure under the WHCA to that of the second injury relief provided by § 8(f) of the LHWCA.
“Although the Department has not denied Claimant any medical benefits, he objects next to the Director’s effort to manage his claim under the provisions of the WHCA. His challenge in this respect, however, is fundamentally flawed. As the Board observed in Smith, the WHCA “provides only a source of benefits.” Upon reflection, the relief from financial responsibility afforded to an employer under the WHCA for war risk hazards seems strikingly similar to the relief afforded to employers that hire workers with pre-existing disabilities under Section 8(f) of the Longshore Act. In both situations, employers and carriers are, in certain circumstances, permitted to shift all or part of their financial responsibility for work-related injuries to a fund administered by the Department.
This is significant here because the Board has articulated the principle that, under circumstances in which only the source of funds for the payment of benefits is in issue, a claimant has no standing to challenge the applicability of the statutory provision that determines the funding source.”
The Department has no right to deny the claimant benefits. This is not an issue. The issue is the refusal of the employer to authorize them.
The use of the procedure under §8(f) is indeed instructive. The claimant cannot, of course, challenge a petition made by the carrier under §8(f). But, first, what is to be paid is the subject of an order which binds the carrier to pay the first 104 weeks of permanent disability and an order for the DLHWC to pay from the Special Fund the remaining amounts due. This modifies any previous order. Secondly, the Fund itself is not money or property of the United States. The Secretary of Labor merely administers it. Thirdly, the employer remains responsible for the claim and any modification is his responsibility. He is financially involved through the assessment mechanism which in effect requires he pay the fund a percentage of the amounts paid on his behalf.
The procedure (or lack thereof) under WHCA is delightfully informal. There is no order modifying the Defense Base Act case. The Department imposes their own conditions on the employee, although he has no standing under the WHCA, to “secure” his benefits already awarded, and provide paper work which could as easily be dealt with by the employer and the Department. They could perfectly well write to the providers or order the carrier to do so and explain the change in payment mechanisms which they have imposed, with considerably more credibility than the employee. There is nothing ordering the Director to pay, and the funds that are used are government funds. The carrier, although clearly responsible under the DBA for the management (but not the payment) of the claim has no fiscal responsibility to the government; and if he spent money to deny the surgery, he would be reimbursed for the expense with a 15% administrative fee on top. The Department is responsible for paying the claim, not for managing it.
The situation is nothing like 8(f) relief, and from the carrier’s point of view, far closer to an excess or reinsurance without a “follow the fortunes” clause in their favor. Sooner than accept their responsibility under the DBA and either authorize or deny the surgery, they evade the question by suggesting that it is the claimant who is causing the problem; and seek to remove themselves from the risk of taking a decision by insisting that the claimant must get authorization from the person responsible for paying, rather than the person responsible for authorizing or contesting the benefits.
It is to be hoped that the BRB will reverse the order of the OALJ and order the DHLWC to hold an informal conference to authorize surgery, if the employer does not do so in the interim.
Some other problems with medicals under the direct pay provisions
In writing this blog, I have been told of other problems. Two examples are attendant care and psychological care. Under DBA there are payments to family members who quit their job to take care of severely injured relatives. But the provisions of 20 CFR 10.314 appear to exclude payment to non-qualified personnel. Similarly, reimbursement follows precise agreed diagnoses, so that a claimant who has PTSD and depression “must” have an ICD 9 code for both PTSD and depression even if depression is the consequence of the PTSD. This means, presumably, that to “secure” his benefits has to write to his providers and explain why they have to fool around with coding, dictated by regulations that play no part in the treatment, cure or amelioration of his condition.
This is an area that calls for revision of the two statutes and regulations to provide ones that assist the claimant rather than merely the carrier and the government agency.
[1] The ALJ in a footnote remarks that the claimant cited the case as “Gordon v. Director”. The claimant’s name in the case was “Gordon V. Smith” so the decision is “Gordon V. Smith v. Director”. No doubt it was this unusual combination that allowed the error to creep in.
[2] The ALJ refers to §104(a)(3) as a source of reimbursement. It appears that this is the fault of the printing of the statutes in the booklet LS Publication 590 issued by the Government Printing Office. The layout in Lexis Nexis “Defense Base Act and War Hazards Compensation Act Handbook”, edited by Roger Levy, appears correct. §104(a)(3) ends with the words “arising from a war-risk hazard;” and the full section 104(a) continues with the words “such employer, carrier or fund” which apply not only to (3), but to (1) and (2) as well.
[3] The ALJ writes that §61.104(a) implements the direct payment provisions. 61.104(a) actually deals with reimbursement of “reasonable and necessary claims expense.” This must be a slip of the pen.
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